7 Things You Need to Now About LVR Restrictions in NZ

What Are the LVR Restrictions?

Property investors and homebuyers need to understand Loan to Value Ratio restrictions (LVRs). That’s because these rules dictate how much a bank can lend you for a property.

They are set by the Reserve Bank of New Zealand, the government organisation that makes the rules for all commercial banks (like ASB, BNZ, ANZ and Westpac).

Let’s go through an example to see what we mean.

Say that a bank can only lend you up to 60% of a property's purchase price.

That’s the LVR restriction. But the flip side of that is – if the bank will only lend you 60% of the money for a property – you'll need to come up with the other 40% as a deposit.

Therefore LVRs set how much of a deposit that you need to purchase a property.

What Are The Current LVR Restrictions From The Reserve Bank?

Right now, owner-occupiers require a 20% deposit to purchase a property within the LVR restrictions.

Said another way, banks can lend up to 80% of a property’s value to an owner-occupier.

Property investors, on the other hand, require a 40% deposit when purchasing an existing property.

Similarly, that means that banks can lend up to 60% of the value for an existing property.

But, it is essential to note that not all lending needs to come under these restrictions. The banks still have the discretion to lend money to some borrowers with lower deposits.

For owner-occupiers, only 90% of the bank’s lending needs to come within the LVR restrictions. That means about 1 in 10 loans can be given out to borrowers with a lower deposit (say 10%).

For investors, it is more strict. 95% of the bank’s lending to investors needs to come within the LVR restrictions.

And in practice, very few low-deposit loans to investors are approved.

But, there is an important exception to these rules. New Builds do not come with these restrictions. They are exempt from the limits.

That means that the banks will often lend up to 90% of a New Build’s value for a first home buyer and up to 80% for a property investor.