The Reserve Bank doesn't want you eating the cupcake, so they are putting first homebuyers on a housing diet. Meanwhile politicians are using the new low deposit rule as a political football with phrases like "locking first homebuyers out of the market." It's not that bad. Here is everything you need to know. The Reserve Bank has introduced a speed limit that will reduce the number of loans above 80% by about half. That means about half of first homebuyers and most squirrel clients will still be able to get a mortgage approval. That said, the next 1-3 months will be tough as the banks come to grips with the new rules. They are likely to be more conservative to start with, until they understand the nuisances of managing within a limit. Lenders will be apprehensive towards pre-approvals until the existing pipeline of pre-approvals has reduced. Most old pre-approvals will expire by Christmas so sanity should prevail in the New Year. Generally, lenders are more likely to approve buyers where they have a property already under contract, or a specific property in mind. Where you have less than a 20% deposit, pre-approvals are only likely to last 1-2 months.
Welcome Home Loans is available to owner-occupied buyers with a 10% deposit and is exempt from the RBNZ rules. Maximum income is $80,000 for an individual or $120,000 for a couple and the maximum purchase price in Auckland is $485,000.
We currently have 2 non-bank lenders in Resimac and Liberty who will lend up to 90%. They are struggling with demand and their service levels are terrible at the moment. Once the market settles down these guys will become two viable alternatives to the banks, if needed.
We can do a limited guarantee from Mum and Dad where they provide additional security for 20% of your mortgage. The guarantee is limited to 20% and can be limited to the mortgage facility, which will keep your folk’s lawyer happy. Lawyers hate guarantees so it is important that we keep your parents well informed through the process so they don’t get a last minute scare. Another option is to get the balance of the 20% as a loan from your parents. Lenders are ok with family loans provided it does not have to be repaid until after the property is sold. We have a Deed of Debt document that we use for this purpose.
Under the new Reserve Bank rules, banks are not allowed to lend where the deposit has come from a second mortgage or personal loan. The same restriction doesn’t apply to non-bank lenders so we can potentially do this although it will be expensive.