What is LVR?
A loan-to-value ratio (LVR) is the measurement of the size of your loan in comparison to the value of your property. For example:
- The house you're interested in = $500,000
- The deposit you've saved = $100,000, which is 20% of the purchase price
- The home loan you need = $400,000, which is 80% of the purchase price
- Your LVR = 80%
The larger your deposit as a percentage of the house you're buying, the lower your LVR. This means you're in a stronger financial position and it can be less risky to lend to you.
The Reserve Bank of New Zealand supervises all registered banks operating in the country. It's New Zealand’s central bank.
In October 2013, the Reserve Bank introduced LVR restrictions due to its concerns about rapidly rising house prices, coupled with an increasing use of low-deposit loans. The central bank hoped that not only would LVRs take some of the heat out of the housing market, by making it harder to buy a property, but that having a larger deposit would also provide borrowers with a bigger buffer if property prices fell.
You can read more about LVR restrictions and why they were put in place on the Reserve Bank’s website.
How much deposit do you need for a home loan?
A standard home loan deposit is usually 20% of the property's purchase price.
In some cases, you can buy a home with a deposit less than 20%, which gives you a higher loan-to-value ratio. These aren't as common but we can assess your situation and see if this is right for you.
You'll need to meet our lending criteria to ensure that you're able to make repayments on your loan, as well as other criteria, such as debt-to-income (DTI) requirements.
How much owner-occupiers need
If you'll live in what you're buying, here's a quick look at your options.
|
Deposit |
LVR |
What this could mean |
|
20% or more of the purchase price |
80% LVR, considered normal |
Standard home loan options available |
|
10-19% of the purchase price |
81-90% LVR, considered high |
You may be eligible for low-deposit lending |
|
5% of the purchase price |
95% LVR, considered very high |
You may qualify for a Kāinga Ora First Home Loan or a Kāinga Whenua Loan |
Buying with less than a 20% deposit
If you think you fall within this bracket, see our low deposit options page to explore which home loan types could work for you.
How much investors need
LVR restrictions are higher for investors, due to higher risks associated with these types of loans.
If you're buying a residential investment property, you'll require a minimum deposit of 30% of the property purchase price. Your LVR will be at most 70%.
Talk to us about your deposit
Got questions? Sure you do, this is a complex topic and can be easier to get your head around it when someone explains it to you. If you want to know what your options are, we can work through what's possible for you and what you might be eligible for — get in touch.
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