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Mortgage firm calls for 'LVR loophole' clarification to lenders

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NZ Adviser | 08 Aug 2016, 04:32 p.m. Agree 0
A leading mortgage advisory firm has highlighted the ‘LVR loophole’ locking owner occupiers out of the market and urges the Reserve Bank to clarify the LVR rules to lenders.
  • woodsy | 08 Aug 2016, 04:51 p.m. Agree 0
    I think Satish has missed the point, banks wont do open ended bridging....and good luck with that pre-approval which isnt actually worth holding onto....might as well wait for a sale of the existing house and get a standard approval...no ?
  • Adviser | 08 Aug 2016, 05:14 p.m. Agree 0
    The conditional approval has the potential to be very dangerous. If the old property does not sell, then the new finance may not be provided and the deposit may be lost for the new property. Not to mention the additional interest that may fall due and the delay for the vendor on the new property which may invoke similar issues for them on their next one, etc, etc. To avoid this the purchaser may have to accept a lesser value on the property they have to sell, this too puts the whole situation at risk if the value for the old property does not provide enough money to settle the new property. Conditions that extend into unconditional contracts is not something to be treated lightly. The unwitting can and will lose money, and possibly more if they are not careful.
  • Robbi Zeng | 08 Aug 2016, 09:07 p.m. Agree 0
    I am surprised Sarah made this comment. (assuming) She is an experienced lender, in such a market, who would recommend customers to buy before sell? And in fact, everybody, I am not talking about just people who intentionally try to cheat this (so call) loophole, people who are truly upgrading their family home. If banks agree to do open ended bridging just like that, these people technically change their mind after buying the new home and say, opps, we actually don't want to sell our old home now.. as banks don't have legal mechanism to "mortgage sell" their old family home (now becomes investment), RBNZ rules then becomes nothing.

    As a lender, I think to honour the spirit of the RBNZ guideline, banks should not be doing any open ended bridging loans. And we lenders need to highlight all associated risk for different kind of closed bridging loans.

    And to response those who have the thought of "I want to buy this home now even I haven't sold my home. Because this is such a nice home" Please be more realistic, if you buy the "dream home" and you cannot sell your current home at the price that it needs to, at the end of the day, who will be in trouble?
  • Ananmyous | 09 Aug 2016, 05:49 p.m. Agree 0
    What if you have investment properties but dont have a home of your own, do you still have to have a 40 % deposit for your first home?
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