Can I borrow over 80% of the purchase price?
Yes – but with conditions.
Lenders are now stricter with lending over 80%. It is still possible if you have stable work history, good income, clean credit and no other debts. When borrowing below 80%, the lender may normally allow you to borrow up to 5 times your annual income. When borrowing above 80% you may normally be able to only borrow up to 4 times your annual income. This is because the lender may require you to pay-off any borrowing over 80% of your mortgage faster, thereby lowering your borrowing ability.
Borrowing over 80% in the current market comes at a cost. The cost will either be as an upfront fee charged by the lender (up to 2.5% of the mortgage value depending on how high the LVR is) or as a low equity premium added to your mortgage rate. With the upfront fee, the lender may give you the option of adding the fee to your mortgage. If the lender includes a low equity premium, this can range from 0.50% to 1.00% above standard mortgage rates. When you borrow above 80%, a registered valuation will be mandatory (cost $500+GST). You will also be well advised to take ongoing mortgage protection or income protection insurance cover,besides life insurance cover regardless of whether you borrow below or above 80%.
Would you like to speak to one of our financial advisers over the phone? Just submit your details and we’ll be in touch shortly. You can also email us if you would prefer.
Self Employed
Are you in business (Self Employed) or in a Contracted Role?
Being self-employed has its own financial challenges – especially when it comes to finding the right mortgage to suit your cash flow!
Some people may not easily be able to provide proof of their income including:
- Self employed people
- Commission income earners or Contractors
If you’re one of these people and borrowing up to 85% of a residential property’s value, talk to us. You’ll still need to prove your income and will need the following as proof of your self employment:
- Self employed customers – copies of full financial reports for your business for the last 2 financial years
- Commission earners or Contractors – evidence of your earnings for the last 2 financial years
We understand the needs of business people and will help you put together the information you need to get the best financing package, with a minimum of fuss.
To borrow over 80% you need to have been in your business for at least two years. You could be a contractor or managing your own business. If you are a Contractor and in an industry that extensively uses contractors then the lender may be flexible, but will still usually limit your borrowing at below 85%.Exceptions to this are rare currently.
Salaried Applicants
It is becoming ever increasingly hard to convert property assets into cash because of the way kiwi banks are now assessing mortgage and loan applications against a stricter set of rules. Banks have slowly but surely tightened the reins on how they lend money and who to, so no matter how asset-rich you may be – if your income is not up to their standards, you may not be able to get a loan through the bank. It is a lot harder for a single person on a single income to gain a loan against a couple who are both working in well-paid jobs.
The advice here is simple, do not give up on the idea of gaining a loan through the bank. If you think your income is the main reason you are being denied a loan, despite having assets, then seek expert advice. Shop around for different banks and lenders and avoid doing anything drastic like switching jobs, moving, maxing out credit cards or anything else that could work against you. Eliminate debt as much as possible and put all your time into building up cash savings and maintain a good credit record, banks like to see someone who is steady and disciplined with their finances. The bank will not lend to anyone, of any salary type, who appear to be risk-takers with their money.
What kiwis are saying about usOur journey with our clients lasts beyond the life of their home loan. That’s why we ask them to keep us posted on how we are doing along the way.
Satish is a very honest man and genuinely cares for his clients. He gives very good advise to his clients based on their needs. I would highly recommend using his services. He also gives his 100% to get the best deals from the banks for his clients.
I have dealt with Satish on more than one occasion – primarily for arranging mortgage. I have found Satish a very knowledgeable and reliable person to deal with and he has a pragmatic approach to solving problems. I will be happy to deal with him again for any mortgage/financial advisory related matter and without any doubt recommend him to anyone seeking such services.
Satish was very helpful and informative in arranging finance for the home buying process. He clearly advised of all available options for the process and ran through the best fit for our situation. I highly recommend Satish.
Satish has been extremely friendly yet professional in his business dealings with me. He knows his subject very well, and provides valuable financial advice. I would highly recommend his services to anyone, because I have found Satish reliable and helpful.
I have solicited Satish’s advice quite a few times relating to Mortgage. At all times he has been able to provide insights that has helped me arrive at informed decisions. Satish’s candidness and willingness to help is highly commendable. I would have no hesitation in recommending him at all.
