New loan-to-value ratios could make life even tougher for first time home buyers says Pooja Goel.

New loan-to-value ratios that could force homebuyers to stump up to a 20 per cent of the purchase price before they qualify for a mortgage are expected to come into effect from October 1.

The Reserve Bank's Loan to Value Ratio (LVR) limit means in most cases home buyers will need a deposit of 20 per cent or more.

The limits are being introduced to avoid the risk of bank failures in the event of steep and widespread falls in house prices, such as occurred elsewhere during the global financial crisis, triggering a worldwide recession.

The drastic action from the Reserve Bank to cool the housing market will make life even tougher for first time home buyers.

Banks will still be able to hand out some loans to borrowers with less than a 20 per cent deposit. However, with the combined dollar amount of such loans it will be limited to 10 per cent of the bank's new lending. So now it will be up to each bank to decide who does and doesn’t get a loan within that narrow limit.

The Reserve Bank has signalled it will give banks a six month grace period to honour pre-approved loans.

Other options included personal loans and family member guarantees, which mainstream banks had already indicated they would accept.

Pooja's tip: "It is imperative that you get in touch with a mortgage broker and get your finance sorted before going out and putting offers on properties: This is particularly important with 80 per cent lending restrictions in place. Your mortgage broker may be able to get you leading in excess of 80 per cent as they deal with lenders outside mainstream banks".

Contact Pooja:

https://www.facebook.com/PoojaGoelRayWhite

Phone: 02102615455

Address: 50 King St, Auckland, New Zealand 2120

Email: pooja.goel@raywhite.com

Website: rwpukekohe.co.nz

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