The world is changing. The Reserve Bank, which controls all banking in New Zealand, has been requiring lenders to implement new policies on mortgage lending. You may have experienced a delay because of this, or even found yourself turned down for a loan.
Don’t take offense. All lenders need to comply with Reserve Bank instructions, which are designed to take the heat out of the Auckland property market. Here’s what you can expect if you apply for a mortgage in 2017:
- No more interest-only loans (or restricted extensions). If you own your own home, the Reserve Bank wants you to start repaying the principal.
- Loan to Value Ratios (LVRs). These days you need at least 40% equity if you’re a property investor or 20% if you’re buying a place to live in.
- 90% loans for first time buyers are now a rarity.
- Household expenses are scrutinised. You will have to fill in an expense schedule to prove you can afford your loan repayments.
The days of shiny extras such as free TVs are well and truly over. Cash back offers are restricted or removed entirely. Once again, it’s because the banks are being directed to clamp down on excessive lending.
When you think about it, this is a good thing. No one wants a property market crash! So don’t take it personally, and don’t shoot the messenger, if the banks make it a bit harder to get the loan you want.
Are you thinking about buying a home or changing your mortgage? Make sure you get expert advice.