What do I need to know about Loan to Value Ratios?

On 28 November 2018, the Reserve Bank loosened the Loan to Value Ratio (LVR) restrictions for both investors and owners-occupiers, with changes coming into effect in January 2019. This is what you need to know about LVR.

LVR unpacked
LVR is the amount of your loan compared to the value of your property.

It is calculated by dividing the amount of the loan by the value of the property. For example, if the property is worth $250,000 and you have a deposit of $50,000, the LVR will be 80%. ($250,000-$50,000)÷$250,000 = 80%.

Residential property investors

Following lending restrictions introduced by the Reserve Bank of New Zealand, banks are unable to approve loans for residential investment properties if you have less than 35% deposit, unless your the loan falls within an exemption.Your bank or mortgage provider can provide you with support and information. 

This restriction applies to new applications and/or top-ups. Applications for lending against owner-occupied property are also impacted if there is a residential investment property in the lending mix.

Exemptions may apply such as if you are refinancing from another bank, or if your house is under construction. If you'd like to find out more, talk to the BNZ Property Investment team.

LVR exemptions for new housing

Under some circumstances there are exemptions to LVR restrictions. Where a loan falls under an exemption, the loan is not included in the banks’ high LVR ‘speed limits’. These exemptions include lending (including increases of existing loans) to finance the construction of a new house or apartment.

Information sourced from the Reserve Bank and our Bank, BNZ.