First Home Buyers will be left out in the cold

The new loan restrictions announced by the Reserve Bank means some first home buyers with less than 20% deposit will miss out as the banks decide which customers they want.

Those in the ‘poor middle-class’ would miss out to those people who had high incomes and secure jobs reports the New Zealand Herald

However, there may be ways of getting around the restrictions by using second tier lenders, who are not banks and are therefore outside the new regulations.  These lenders will do LVR (low value ratio) lending, offering second mortgages to first home buyers.

This makes the policy a nonsense says the Professional Advisors Association.

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Mortgage limits imposed on low deposit buyers

From October 1st 2013 buying a home will be a little tougher for those who have a small deposit.

Banks will be required to restrict the percentage of low equity mortgages to no more than 10% of the dollar value of their lending – which means they will be restricted to how many mortgages they can approve for people with less than 20% deposit.

The Reserve Bank action is designed to cool the housing market, and acts independent of the government who wanted first home buyers to be exempt. Source: TVNZ. The Reserve Bank was concerned about the rate house prices were increasing and the risks to the financial system.

Kiwibank said that it will prioritise first home buyers over property investors, but the critical issue when assessing a loan application was the borrowers ability to repay the loan, not how much deposit they had.

Harcourts NZ CEO Hayden Duncan said first home buyers will be penalised, and the move will have no impact on the real housing issue – which is low supply.

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Low Equity Home Loans fine with RESIMAC

RESIMAC, who are non-bank lenders, have increased their longer term fixed interest rates for HVR (high value ratio) lending.

The change was prompted by growth in demand for loans with less than 20% equity. RESIMAC say major banks seem to be avoiding low equity loans – loans that they are prepared to take on.

The Reserve Bank is currently considering restrictions around high loan-to-value lending growth.

ANZ, BNZ and Kiwibank have all recently lifted their longer term mortgage rates.


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Commercial Loans

Whether you are looking to buy a commercial property to house your company, as an investment or needing to get a loan to expand your business, there are a number of different options available.

The fundamentals surrounding borrowing for commercial endeavours are a little different from those that affect residential. Commercial and business ventures often require more of a specialist approach as the main trading banks have most of their resources dedicated to funding owner-occupied & investment residential lending.

Commercial property investment is more popular now than it was before the GFC due to a combination a rapidly growing business population, historically low interest rates & the Reserve Bank decision to cut loan-to-value ratio on residential investment to 60%, nationwide.

It’s important to know that trading banks change their appetite all of time in regard to the type of lending they want to be involved with. This applies equally to commercial and business lending. Just because you have been with a particular bank for many years does not mean that they will lend you the most money for a commercial venture, in fact they may not lend at all.

Having an overview of the whole lending market is imperative, not only work out where you can borrow the most but to make sure that the lending you get is at the best rate and structure for your needs.

When it comes to funding for the development of commercial property, or where commercial property is acquired for the purposes of tenanting and on-selling, there are a number of options outside the main trading banks. These lenders understand quick turn-around of property and focus on the asset as opposed to needing to prove income. These types of lenders are also useful for those borrowers who would like to hold a property for a longer term but cannot prove income at the time of purchase.

Even if you don’t own a commercial property there is often a need to borrow for the purposes of expanding a business. This requires borrowing against the current cashflow, or projected income, and provides its own challenges as the lenders cannot secure over “bricks and mortar” but need to take security over the business.

There has never been a time when the banks look at lending propositions in more detail than they do now. It is important to present the deal in the right way to the right people and that’s what we specialise in at Edge Mortgages. For more than a decade we have helped many people into commercial property and with business loans.

Our lending experience is huge and we have access to a number of lenders – both inside and outside of the main trading banks.

If you are looking at any type of commercial project it makes sense to surround yourself with a good team. We can help with all your finance requirements and are happy to discuss your plans.

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Auckland property market still strong

House prices in Auckland rose for a third month in July according to Barfoot and Thompson. The median price was $585,000.

Although the number of new listings has increased, competition is still strong because the total number of listings is still low – Barfoots listings for July this year was 20% lower than the same time last year.

Source: NZ Herald

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