Recently there has been major change to the LVR restrictions imposed on lenders by the Reserve Bank. This effects the amount that people can borrow for an investment property due to banks being limited to lending no more than 60% of the purchase price of an non-owner occupied dwelling.
While on the face of it, this severely limits the amount that property investors can borrow, there are some exemptions that have not been largely publicised.
First of all the restrictions only apply to registered banks. There are finance companies and other non-bank lenders who are in the residential home lending business. While some of these lenders may be more expensive than the major banks, they may also be worth investigating for some borrowers.
8 exemptions and insights into the LVR rules for property investors
- If you are applying for a construction loan to build an investment property, this loan is exempt from the new LVR restrictions.
- If you are purchasing a new dwelling (provided it is less than 6 months old and purchased from the developer), the loan for this is also exempt from the new LVR restrictions.
- If you require bridging finance, to complete the purchase of a residential property on a date prior to the sale of another property, again the new LVR restrictions do not apply.
- If you wish to re-financing an existing high LVR loan from one lender to another, the new lender can do this even though the debt may be higher than 60% on a rental property or 80% on an owner occupied dwelling.
- Similarly if you wish to shift an existing high LVR loan from one property to another (provided the total value of the new loan does not increase), this can be done.
- If you wish to borrow to fund extensive repairs or remediation (excluding routine or deferred maintenance), this borrowing is exempt from the LVR restrictions.. This includes events such as a fire, natural disaster, or to bring a property up to new building codes, rental property standards, weather tightness issues or seismic strengthening.
- For those borrowers who qualify for Welcome Home Loans for an Owner Occupied first home, no LVR restriction apply
- Borrowers with owner occupied and investor collateral can use the combined collateral exemption to obtain finance up to 60% of the value of the investment properties and 80% on their owner occupied property.
Because there are so many situations where there are exemptions from the LVR rules, a lot of property investors are finding it to be a very good time to have a review of their lending situation. I am able to meet with you to discuss where you are and where you want to go in the future, then be able to advise you of your borrowing capacity and help devise a plan to make the most of your situation. Contact me today by email at email@example.com