How the RBNZ changes affect you and your investment properties
21 July 2016
From today, we are making changes to our lending policy. On 19 July 2016 the RBNZ announced intended new LVR Limits for property investors:
All new property investor applications require a minimum of a 40% deposit (or a maximum LVR of 60%)
Lin has a home worth $800,000, and owes $250,000 on her home loan. This means she has $550,000 in equity – equity is the portion of your property you’ve paid for. When Lin first put down a deposit for her home, the deposit was her equity in the home, but as she’s paid off more of her home loan, her equity has grown.
Lin decided to use $180,000 from her equity to purchase an investment property for $450,000, using this equity instead of needing to save for a deposit.
After her purchase Lin now has two homes worth a total of $1,250,000. She has borrowed a total of $700,000. In this example's Lin has 44% equity across her portfolio (or a LVR of 56%)
Remember that your equity is based on what your property is worth now, which is probably different to what you paid for it.
There are some exemptions such as Construction loans and loans for remedial work for issues like weather tightness – You can access the RBNZ statement here: http://www.rbnz.govt.nz/news/2016/07/reserve-bank-consults-on-new-nationwide-investor-lvr-restrictions
Changes to lending to foreign property buyers
9 June 2016
Westpac has changed our policy regarding lending to foreign home buyers.
Westpac will no longer be lending to non-resident borrowers with overseas income. Borrowers with temporary resident visas may still be accepted if they have both a New Zealand address and New Zealand based income. The tightening of this policy reduces risk and will contribute to further strengthening home lending portfolios with customers who we have a deep and long term banking relationship with.
There has also been a reduction in the maximum LVR (loan-to-value ratio) from 85% to 70% for New Zealand citizens and permanent residents with overseas incomes.
New Zealand passport holders living overseas purchasing property funded by overseas income are not affected by these restrictions.