If you’re looking at buying your first home and think it might be the right time to take the plunge, there’ll be a number of different scenarios going through your mind. What’s the impact of LVR’s on new builds for first home buyers? Is it best to build new or buy existing? Is now a good time to buy? Have I got all the information I need to make the right decision? And the list goes on!
It may feel frantic but there are a few basic things you can do to secure a mortgage. Let’s take a look at what LVR’s mean exactly and how they might relate to you.
What is LVR?
To quote the Reserve Bank, “a loan-to-value ratio (LVR) is a measure of how much a bank lends against mortgaged property, compared to the value of that property.” The ratio is typically measured in percentage.
LVR’s were removed for a year in May in response to COVID 19. Just this week, the Reserve Bank has signalled the banks to lend like LVR’s are back. Which means the banks are now limiting the number of new “residential housing as an owner-occupier” customers who have an LVR of more than 80%. Restricting new lending acts as a bit of a safety buffer, as a housing correction would particularly impact highly-indebted borrowers. And the banks too, of course.
Heaps of reasons to build new
Despite high mortgage loans being restricted, the banks will still lend to low deposit, first home buyers, particularly when you’re building a new home. Meaning the impact of LVR’s on new builds for first home buyers might not be as big as you think. And there are heaps of reasons why you should look at building new when it’s your first home.
For starters, you may be eligible for a First Home Grant. This is a government grant of up to $10,000 for new builds or land and $5,000 when it’s an existing home. Even with just a 5% deposit, you may be able to borrow enough to buy a first home. If you’re in KiwiSaver and have been contributing for at least three years, you may be able to withdraw almost all of your savings (including government and employer benefits) to put towards buying your first home – you only need to leave a $1,000 balance in your KiwiSaver.
Improve your chances
Don’t despair, having a 20% deposit, depending on where you want to live, can be a big ask, but it doesn’t have to be the end of the road. The bank wants to know you mean business and that you’re serious about paying back the loan. As a first home buyer, if you need to borrow more than 80%, there are a number of things which will improve your chances. Things like:
- a steady income
- having a saved deposit – which could be KiwiSaver
- good spending and budgeting habits
- being in charge of your living costs
- little consumer debt
Just as having a couple of credit cards maxed out will not look great, the same applies with taking off to Martinborough for a weekend of wine tasting if you’ve got nothing left to save at the end of the week.
Get your borrowing ducks in a row
So, get your borrowing ducks in a row, touch base with the banks and remember to check out the mortgage brokers also. They’re dealing with the banks all the time and are very familiar with exactly what you’ll need. And you certainly won’t know until you’ve given it a go! Good luck with your application and we look forward to sorting your new build, dream home soon!
It would be our pleasure to take on your building project. Get in touch with our team or call 0800 100 945 to start your exciting new build journey today.
Longview Homes builds both custom and pre-designed homes of exacting quality, built to last. We are a New Zealand owned and operated company with locally-owned franchises around the country.