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LVR restrictions NZ 2021: loan to value ratio for investment property reduced to 60% - YouTube
Channel: Prosperity Finance_NZ Mortgage Broker
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- Hello, it's Connie
from Prosperity Finance.
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I hope you had a great long weekend.
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Now over the last few days,
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you probably heard more
banks has followed ANZ
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and reduced the LVR,
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which is loan-to
value-ratio from 70% to 60%,
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if you are buying investment property.
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Well, I wasn't surprised
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because the property market's
still really, really hot.
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Just want to take this
opportunity to give you an update
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in terms of what is the latest LVR policy.
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And also if you are still
looking to buy rental properties,
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what are the ways to get around
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with the deposit requirements?
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'Cause I've been asked a
lot recently, you know,
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I leave it too late,
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I still want to buy, what should I do?
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And finally, I just want
to use a case study,
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a real case study to illustrate
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what you can do to improve
your current structure
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so that you take the
opportunity when you can.
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So, firstly, let's talk
about the latest policy.
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So at the moment, the
banks who are lending 60%
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on investment properties.
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These banks include ANZ,
Kiwibank, ASB and BNZ.
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Now the banks that still lending 70% LVR
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on investment property are
Westpac, BNZ and Chinese banks.
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You probably heard, I said BNZ twice.
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Yes, they lend 60%,
but they also lend 70%.
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Why is that?
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Now what happened was BNZ
introduced policy and said
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If your application was bringing in
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by a financial advisor, mortgage broker
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I can only lend you 60%.
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However, if you approach us
directly, you can borrow 70%.
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I was so disappointed when I saw the news.
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Why is that?
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Well, this is the first time I heard
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that banks introduced policy
that has a different treatments
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for different channels.
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In this case, whoever work
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with mortgage broker get
disadvantaged, right?
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That's really wrong.
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And they encourage people
to go to the bank directly.
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Now I used to work for a
bank for a number of years.
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Now one of the reason I resigned
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and start Prosperity Finance was
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because bank can't always
in your best interest.
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They have to only sell their own products.
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They can only have their own
policy and they have targets.
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So even your bank manager
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doing absolutely everything
they can to help you,
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they can't hundred percent
in your best interests.
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It just because the limitation
by the bank offering.
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Hence why I want to be
neutral, I want to help here.
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And that's why,
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and in all of our services
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we always go beyond and
above the servicing,
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the LVR is normally,
is a holistic approach.
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It's about your asset protection.
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It's about your tax efficiency.
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That's about flexibility.
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Like now, if you borrowed
everything from BNZ,
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you're probably stuck
with the equity, right?
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And you probably
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if you sell anything,
your existing portfolio,
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you can't keep anything in your hands.
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So that's about flexibility.
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And it also saved the interests,
bank never tell you that.
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So they encourage people
to contact them directly
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but client do not get expert advice.
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However, if you have
to only borrow from BNZ
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for buying investment property
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and you definitely need to borrow 70%
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but all means you go to BNZ directly
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'cause otherwise you
couldn't buy property.
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So yeah.
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Anyway, so I just want to
just cover that part as well.
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Right? So next parts,
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let's talk about if you are
looking to buy rental property
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and you struggle getting
more deposit or more equity,
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what are the options?
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Okay, so number one, if
you buy a new property,
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the way we define your property is the CCC
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was issued within 12 months.
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So it doesn't have to be off plan property
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or it doesn't have to be a
property under construction.
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You can buy existing property
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as long as the CCC was
issued within 12 months
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'cause the new built is LVR exempt.
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So you can borrow up to 80% even.
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Now second option is to
go to a non-bank lender
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when you purchase the property,
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You can go to a bank and most
of the people go to the bank.
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But some reasons bank
may not give you the loan
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or enough loans.
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So sometimes you can
use a non-bank option to
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widen your options.
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Sometimes it's about having
that solution there, right.
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Now with the non-bank lenders.
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Yes, their interest rate
will be a bit higher.
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So you probably expect from 3% to 7%.
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And depends on lender
and depends on situation.
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Obviously, if we can help
you save interest, we will,
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is like, you know, there will be a range.
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Yes, definitely high interest rate.
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But that could mean from
no solution to solution.
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So you need to do the math and figure out
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if that's the option
that you're going to use.
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Non-bank can do 80%
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because they are not
governed by reserve banks.
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So, they don't have to follow.
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They're not banks, right?
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So they set their own policy, right?
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So as long as they have enough
appetite, they will do it.
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Right? So that's the second option.
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Now there's one more option.
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And it's actually bank option,
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is lot of people, they think
they don't have enough equity,
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but they do.
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If they get a valuation done,
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normally the bank do not
require registered valuation
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which is the paid version.
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They use a system called
Valocity or a CoreLogic.
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In New Zealand, there
are two system they use
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for evaluating a property value.
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They get the value for your property.
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You don't have to pay for this.
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However, the value may
not reflect the true value
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of your property.
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If you put your property
for sale in today's market,
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you probably end up with much higher value
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than what the banks use from the EV,
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which is the estimate value.
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The reason being is both system,
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they use the same methodology,
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which is they compare your
property with another property
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or other properties in
your area, you know,
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like five k distance for example,
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and then see how much
they've been sold for
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over the last six months.
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Now, when we are in the rising market,
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the value was actually
for a few months back.
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So of course, if you're
selling your property today
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you're going to get more money
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than a few months back, right?
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But you just have to pay
for valuation service
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'cause that involved professional
valuer to go to the site
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go to your property and then
do a comparison manually.
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The cost is 0.1% of your
value, just as a rule of thumb.
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For a million dollar house
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probably costs you 1,000
dollars to do the evaluation.
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And once we put your property
into that evaluation system,
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it will automatically show the costs.
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So you can get the costs upfront.
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We mentioned about the
different methodology
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between a registered valuation
done by a professional value
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versus you getting the
value from the banks, EV.
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that's because the market is changing.
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But also valuer can access
to some of the latest data
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that the EV doesn't even
the property is not settled.
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Now, if you know your
neighbors sold the property
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like 200 K above the EV,
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and your property is even a
superior than the their property
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then that's kind of a signal
that probably do a valuation.
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It's probably help you
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push the equity significantly.
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And also when the value
goes to inspect the property
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it's probably best to let them know
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which property sold for how much
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'cause they may not
aware the sales records.
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As long as you give them an address
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and an indication of sale price,
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they can contact the agent
and find out the evidence,
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how much the property was sold for.
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So then you can get the
best possible value, right?
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So these are the three options.
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If you're still looking
to buy a rental property
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and your struggle with enough
deposit or equity,right?
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Finally, I just want to
quickly use a case study
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to illustrate how important it is
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to review your current
portfolio, your loan structure
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'cause if all the banks change LVR to 60%,
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you probably lose this opportunity.
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Last year about mid-November,
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we publish article on our
website and YouTube channels and
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WeChat account about
what you need to do to
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grab the opportunity to
in case LVR do go tighter.
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So these points are still relevant,
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even though we are talking
about from 70 to 60%,
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the principle are the same.
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So if you haven't done so please do that
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'cause if you miss that,
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I don't know when this next time
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you can buy a property again or
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have that those benefits
that I mentioned in my blog.
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Now here I just use a quick case study.
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We have existing clients.
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They have ASB bank for their home loans.
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So ASB use their family
home and one rental property
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as securities for for the
loan they borrow from ASB.
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And they also have Westpac loans
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against one rental property.
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Now over the last 12 months,
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the Westpac rental property has
gone up value significantly.
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Now the client always have
a concern about leaving ASB
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because with the ASB, because
they bank with ASB early.
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They have really large revolving
accounts is called Orbit.
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Now they have a 550 K orbit
accounts, facility limits.
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Now, just so that you
don't know, like bank now
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have restriction about what is
the cap limits for revolving.
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So largely, you know, up to a 300 k,
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once over that you can't have it, right?
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'Cause bank want to control that.
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But if you already have it, you have it.
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They won't remove it.
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And just, for the new ones.
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Now, they don't want to leave ASB
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even though they're
not happy with the bank
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because they just feel
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that it's so handy to have
that 550 K revolving, right?
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So they can't leave.
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And secondly, the family
home, they want to protect,
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they know it's the best practice
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to discharge their family home
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but they just can't 'cause
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their LVR rule has limitation.
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So after they reviewed our article,
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they approached us and
asked to review for them.
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So what I noticed
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that one Westpac property has
gone up very significantly.
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They can top up up to 500K, right?
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So with that 500 K we can use 300 K
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to replace, partially
replaced ASB orbit account
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so that their Orbit reduce to 250 K.
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So they still have the 550 K revolving
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but it's made up of ASB
250K and Westpac 300K.
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So that even they move banks later
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from ASB to another bank,
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they can still easily to have
250 K it's not 550 anymore.
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So they don't need to have
that string anymore, right?
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So that's number one.
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Now, I mentioned the
top up was 500, right?
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So that 300 K goes to
replace the orbit accounts
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and there's another 200K to
repair ASB existing fixed loan.
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So by doing that, ASB total
facility is reduced by 500K.
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As results, Westpac
property, top up to 70%
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of the maximum LVR.
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So we don't care if it's
Westpac introduced 60% LVR.
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And on the other hand, ASB rental property
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also get up to 70% and their
home was mortgage free.
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So that's great.
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That's what they want, right?
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And also we remove
Orbit constraint so that
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in case they do have to move
away from ASB in the future,
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they can, they are free to go, right?
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So we helped them to achieve three things
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by just shuffling the loan structure
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and helping them to restructure.
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So obviously, we're really,
really happy in the end.
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So if you haven't reviewed your structure
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since the LVR rule change
last year is probably,
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the last chance you can review
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and make some changes.
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So do it as early as you can.
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Okay, thank you so much
for watching today.
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I hope you get some value
from this video and please
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if you can help us spread the love
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and share with other people
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so that they can get benefit as well.
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Thank you so much.
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I will see you next time.
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Bye-bye.
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