GET READY! Two Game-Changing developments you need to know if you’re looking to buy a home.

Have you been finding it hard to get a home loan due to the bank over scrutinising your “discretionary” expenses?

Things like your daily coffee fix, streaming subscriptions or Uber Eats, are all classed as “discretionary” and up until now have been included in the bank’s assessment of whether you can afford a home loan or not.

This has affected a lot of people who would normally just cut these expenses out once they took on a mortgage.

Instead you had to cut them out “before” making an application to the bank and provide evidence in the form of 3 months worth of bank statements to back it up.

In the scheme of things this isn’t actually such a bad idea as it helps to get your budgeting in order before taking on a mortgage, but for most people having to do it for 3 months before applying for a home loan can really hold things up and cause a lot of uncertainty.

But soon this will no longer be the case.

Due to a law change under the Credit Contracts and Consumer Finance Act (CCCFA), those looking to buy a house may now have an improved chance of success as the banks will no longer take into account ‘discretionary spending’ when assessing your affordability for a loan.

The revision to this rule reflects the reality that borrowers usually cut back on discretionary costs, such as coffee or entertainment subscriptions if they struggle to meet their mortgage repayments.

So if you have previously failed to secure a home loan due to your discretionary spending then this is fantastic news for you!

What if your expenses are all in check but you just don’t have enough deposit?

Well, you might be in luck. The other exciting news this week is that the Reserve Bank of New Zealand has proposed a plan to ease Loan-to-Value (LVR) restrictions, which will be effective from June 1, 2023. LVR restrictions act as a “speed limit” for banks to restrict how much low deposit lending they can do.

Currently, banks are operating under the following speed limits:

• 10% limit for owner occupier loans with a LVR above 80%

• 5% limit for investor loans with a LVR above 60%

If the banks agree with this proposal, the new speed limits will be:

• 15% limit for owner occupier loans with a LVR above 80%

• 5% limit for investor loans with a LVR above 65%

So if you’ve been unsuccessful with your mortgage application in the past couple of years, or you have been struggling to get together the traditional deposit then now is the time to get in touch so I can get you approved to buy that property!