Ways of Managing LVR Restrictions for Investors

As a property investor, finding ways to work with the current LVR restrictions to grow your portfolio is important. We share some tips on how you can do that, including in the Auckland property market.

LVR restrictions or loan to valuation restrictions have been put in place by the Reserve Bank to limit the amount of low deposit mortgage lending. The aim was to slow down the overheated property market, especially in Auckland. Recently the Reserve Bank has announced a loosening of the LVR restrictions for both owner occupier and investor-owned properties. From the 1st January 2019, the new LVR restrictions are:

  • Owner Occupiers - Up to 20% (increased from 15%) of new mortgage loans can have deposits of less than 20%
  • Property Investors -Up to 5% of new mortgage loans can have deposits of less than 30% (lowered from 35%).

As a property investor, how are you best able to manage these restrictions? We’ll cover that next.

How Property Investors Can Work with LVR Restrictions

While we’re not financial advisors, nor can we offer personalised advice on property investing, we can share a few general ways you could investigate to grow your property portfolio. We do recommend that before making any decisions, you contact your advisor or mortgage broker to discuss which, if any, of these options are right for you:

  • Balance your current portfolio by increasing borrowing up to the lending limit, to free up equity for the deposit on a new purchase
  • Is your rental property a higher value than your current home? If so move into the rental and rent out your old home. This will allow you to borrow up to 80% on your “Family home” (the most expensive one) and up to 65% on the rental
  • Unlock additional cash flow by refinancing at a lower rate
  • Get your properties revalued to benefit from value increases, then extend the mortgage back to 65%, freeing up equity
  • Consider using freed up capital to renovate a property to increase its value by more than the renovation costs - aim for a $1 spent = $3 in value increase
  • Looking to buy a rental property but need more than the 65% available?  New builds are exempt from this, as the housing supply is being increased. Banks are able to lend 80% on subdivision and construction costs. 
  • Make sure you are maximising your rental returns and use this to stockpile for any additional purchase. This can be used to save interest by paying on one of the current mortgages. For example, the family home mortgage interest is not tax deductible, while the rental property mortgage is.

We do recommend that you consult a financial advisor before making any decisions on how you will manage the LVR restrictions. Once you have your property sorted, we’d like to help you manage it! Get in touch with the team for a free Auckland rental appraisal and learn how we can help manage your rental portfolio today!

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