Your Latest Lending FAQs

With the recent changes in the housing industry we thought we'd answer some of your questions...

We recently asked our social media following what they'd like to know in our next newsletter. We've compiled these questions for you below alongside some of the ones our clients typically ask throughout the lending process.

Please note that these answers are typically general in nature and a full financial review is always recommended for tailored advice for your specific situation.

Questions Asked By You...

As a First Home Buyer, how much of a deposit do I need?



When looking to purchase an existing home, in most instances you'll be required to have a deposit that is 20% of the home’s value. If you have a deposit of less than 20%, you may still be eligible for a loan. There are certain options where you can apply for a home loan with as little deposit as 5% such as through the Kainga Ora First Home Loan Scheme. However, due to the Reserve Bank of NZ loan-to-value (LVR) restrictions a few more terms, conditions and fees may apply. To see whether your existing bank has options for you to borrow with less than 20% deposit, we recommend speaking to a mortgage advisor who can recommend your best options.

To learn more about applying for your first home loan, you can download our free guide by clicking the link below.

Can my parents act as a guarantor on my home loan?



Yes, your parents can act as a guarantor to secure your home loan when you wish to use their existing security equity. However, it's important to note, both parties need to undergo a complete lending assessment to ensure if the worst were to happen, they could individually service the loan. It's always recommended that you seek legal advice and both parties are 100% certain to pursue this option.

What's the difference between Principal + Interest & Interest Only

Principal + Interest:

This is when you have a fixed repayment that goes on your home loan weekly/fortnightly/monthly. On top of this, you are accruing interest on the loan which you pay towards in your regular repayments as well.

Interest Only:

Interest only is simply when you're only paying the interest charges accruing on your home loan while not contributing to reducing the loan size.

Do the banks require a builders report?

A builders report is only required in certain situations when the lender needs confirmation that the property is compliant with building standards. For example, if you offered on a property with monolithic cladding, the bank may require a building report to ensure that the property has no history of leaking or any risk of leaking.

When applying with the Kainga Ora first home loan scheme, they may require you to get a builders report for any property you may purchase. This is their way of mitigating the risk of any future issues arising.

What are the current Loan-to-value-ratio (LVR) rules that lenders are assessing?

Currently in most circumstances, lenders will lend to 80% of the purchase price for an existing owner-occupied property. Some lenders will lend to 90% in some instances but this is dependent on the current lending services the lender can provide and whether you would meet the criteria.

When purchasing an investment property, lenders will lend to 65% of the purchase price, meaning you will need a 35% deposit as opposed to 20% with owner occupied. However, this rule has recently been changed and as of July 1st 2024, the lenders will now only require a 30% deposit instead, lending to 70% of the purchase price.*

This change goes hand-in-hand with the latest changes to Debt-to-income ratios, also effective from July 1st 2024. To learn more, have a read of our recent newsletter outlining the upcoming changes.

*Please note, these numbers are subject to serviceability and affordability. Please always seek advice from a professional that's tailored to your situation.

Is my Kainga Ora First Home Grant pre-approval still valid when they're no longer accepting applications?

Kainga Ora announced as of 1pm 22nd May 2024, they will no longer be accepting applications for the First Home Grant. If you had applied for the grant prior to this cut-off, your application will still be assessed. Once your application is pre-approved or if you already have a pre-approval in place, you have 6 months to purchase a home from the date of issuance before the pre-approval expires.

If you have any other questions regarding your lending, please don't hesitate to get in touch or make an appointment.
 

Looking forward to hearing from you,

Fiona & Amy