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WHAT IS THE EXEMPTION FOR NEW BUILD LENDING?

The Reserve Bank has not included loans for new builds in the latest LVR restrictions – instead, banks will be able to set their own lending criteria and LVR limits (this applies to lending for building a home to live in or building an investment property). This exemption is aimed at increasing housing stock with the hope that this will ease the pressure on house prices.

As banks are able to set their own lending limits on construction loans, there will be some variance between lenders. However, a majority of lenders will allow you to borrow up to 90% of the value of your new build.

The above exemption will not apply to extensions of existing properties. Also, while the exemption will apply to anyone building new residential property, it is thought that first home buyers will see the greatest benefit as they currently make up the majority of high loan to value ratio borrowing.

Note: a construction loan is defined by the Reserve Bank as residential mortgage lending to finance the construction of a new residential property.
Image courtesy of Vichaya Kiatying-Angsulee / Freedigitalphotos.net


 

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