Getting a mortgage with over 50% deposit headache (but Approved by BNZ!)

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Forums › Finance and wealth management › Getting a mortgage with over 50% deposit headache (but Approved by BNZ!)

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761 posts

Ultimate Geek

#2160951 14-Jan-2019 14:07

Linux:
mdf:

Linux: <snip> Gifting of money for deposit

Was it the gifting alone, or the gifting + 50% deposit that was the problem? Did the bank have any suggested ways of resolving the situation?

The RBNZ does not allow it and bank could lose it's banking licence they say

John

Your parents appear to be more than welling to help. What if they signed a personal guarantee, guaranteeing your obligations to the bank? It could be limited to (say) $100k. This gives the bank more security, so should give the bank more comfort?

Unless the issue is that you just don't have enough income to safely support the level of repayments?

Linux

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#2160959 14-Jan-2019 14:26

The issue is disclosure I have already given 1 bank all the information so now the reserve bank know about it

John

wellygary

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#2160960 14-Jan-2019 14:26

sxz:

Linux:
mdf:

Linux: <snip> Gifting of money for deposit

Was it the gifting alone, or the gifting + 50% deposit that was the problem? Did the bank have any suggested ways of resolving the situation?

The RBNZ does not allow it and bank could lose it's banking licence they say

John

Your parents appear to be more than welling to help. What if they signed a personal guarantee, guaranteeing your obligations to the bank? It could be limited to (say) $100k. This gives the bank more security, so should give the bank more comfort?

What baffles me is why this has actually caused such a problem...

LVR rules don't prevent the bank from making low deposit lending they just restrict it to being "less than 5%" of new lending (the OP said it was being classed as an investment property)

The Bank should exclude the gift and class the loan as a low deposit loan, - [The bank have said they are happy with the credit worthiness of the OP- so it should bot be an issue.] - set the loan up on short term floating rate (even revolving) and then once the loan is established have the OP use the gifted funds to pay down the mortgage , then roll it over on to a longer term once all this malarkey has blown over....

Or as some others have said, cancel the current loan application with the bank and go an see a broker to try to get a loan from one of the other Banks.....

ajobbins

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#2160973 14-Jan-2019 14:33

wellygary:

LVR rules don't prevent the bank from making low deposit lending they just restrict it to being "less than 5%" of new lending (the OP said it was being classed as an investment property)

The Bank should exclude the gift and class the loan as a low deposit loan, - [The bank have said they are happy with the credit worthiness of the OP- so it should bot be an issue.]

The issue with this is the bank may well be at their 5% speed limit for the period. They also need to make provision for things like pre-approvals which may or may not turn into loans in the coming months.

Also, low deposit loans may trigger other things like a high interest rate or the need for lenders mortgage insurance - which would be a waste of money in John's case.

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ajobbins

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#2160980 14-Jan-2019 14:38

Linux: The issue is disclosure I have already given 1 bank all the information so now the reserve bank know about it

John

"Disclosure" is only an issue if you're changing your circumstances by lying. If the issue (as I suspect) is that too much of your deposit comes from your gifted money rather than your own, and you could reduce the amount of the gift you're including in your deposit so that it falls below 50% of the total deposit but the deposit total is still more than the 30% required to not hit the RBNZ LVR rule, then you should be good. So as long as more than 15% of the purchase price is your own money (not the gift), then this should work and not be a "disclosure" issue.

But maybe the issue is something else - this magical "50%" number the bank has given you is unclear because there is nothing that explicitly references 50% in the banking regs

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wellygary

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#2160981 14-Jan-2019 14:40

ajobbins:

wellygary:

LVR rules don't prevent the bank from making low deposit lending they just restrict it to being "less than 5%" of new lending (the OP said it was being classed as an investment property)

The Bank should exclude the gift and class the loan as a low deposit loan, - [The bank have said they are happy with the credit worthiness of the OP- so it should bot be an issue.]

The issue with this is the bank may well be at their 5% speed limit for the period. They also need to make provision for things like pre-approvals which may or may not turn into loans in the coming months.

Also, low deposit loans may trigger other things like a high interest rate or the need for lenders mortgage insurance - which would be a waste of money in John's case.

Quite possible... but if that is the case the bank should have explained its rather than a "your deposit is too high so the RBNZ says we can't give you a loan"... which is really not particularly useful for anyone....

gzt

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#2160983 14-Jan-2019 14:43

Linux: The issue is disclosure I have already given 1 bank all the information so now the reserve bank know about it

The banks provide RB with aggregate stats and position disclosure. The reserve Bank don't know about every single loan and don't assess every single loan.

It's more likely this is an implementation of an interpretation at a particular bank.

Another bank or mortgage broker is likely to see things differently.

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#2160986 14-Jan-2019 14:47

Just got off the phone to the reserve bank and they confirmed my bank has it wrong

Andrew little has also confirmed no such policy

John

gehenna

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#2160988 14-Jan-2019 14:52

All this faffing around is why we went with a broker, a family friend though so it worked out very well and he got us a great deal. I just couldn't be bothered with all the stress.

Ge0rge

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#2160994 14-Jan-2019 14:58

Linux: Just got off the phone to the reserve bank and they confirmed my bank has it wrong

Andrew little has also confirmed no such policy

John

Sounds to me like an excellent reason to find another bank.

Geektastic

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#2161004 14-Jan-2019 15:15

Linux:
eracode:
Linux:

Just got off the phone from the bank manager and it's 100% reserve bank and they still can't proceed

John

@Linux Do you understand what the rule is that’s blocking this and can you pass it on to us?

Gifting of money for deposit

John

So how long do you have to possess the money before it is just part of your finances and not a gift? Will it still be a gift in, say, 5 years time?

Wheelbarrow01

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Chorus

#2161005 14-Jan-2019 15:15

If it's any consolation, two mates (who are brothers) and I had an awful time trying to get finance to buy a holiday home together around 18 months ago.

We are three professional guys, who have all known each other for almost 40 years, earning a combined income of over $300k, and with combined net assets totalling over $2.5 million. None of us have dependent kids and two of us own our homes outright, so there's plenty of disposable income between the three of us. The home we wished to buy was just $220,000.

At a 33% deposit, the broker came back and said that no banks were interested in dealing with us due to the the unusual ownership structure (three people, only two of whom are related). So we upped the deposit to 66% - effectively two of us paying our 1/3rd share each up front in cash, leaving the third guy to make the loan - a princely total of $67/week - but we all agreed to be jointly liable for the loan just in case. Even then, for some reason we still could not get finance from multiple lenders, even when we offered another property as security. The broker finally admitted defeat and told us he couldn't help.

In the end, two of us paid for the house in full using cold hard cash, and set up a memorandum of loan for the 3rd guy to pay us back for his 1/3 share over time.

I know this is a completely different scenario to the OP, but the story does at least demonstrate that sometimes, when your application falls outside of what banks consider "the norm", they won't lend anything to you, no matter how much deposit and security you throw at them.

tripp

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#2161013 14-Jan-2019 15:26

Linux: Just got off the phone to the reserve bank and they confirmed my bank has it wrong

Andrew little has also confirmed no such policy

John

More to the point John when do I move in? :)

Hope you get it sorted buddy.

wellygary

8312 posts

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#2161019 14-Jan-2019 15:43

Wheelbarrow01:

I know this is a completely different scenario to the OP, but the story does at least demonstrate that sometimes, when your application falls outside of what banks consider "the norm", they won't lend anything to you, no matter how much deposit and security you throw at them.

Agreed,

I suspect the days of front line bankers ( or even their managers) actually having much discretion has long gone and its simply a case of

"The computer said No..."

ajobbins

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#2161021 14-Jan-2019 15:45

wellygary:
I suspect the days of front line bankers ( or even their managers) actually having much discretion has long gone and its simply a case of

"The computer said No..."

Another reason brokers can be an advantage. They have access to back office team's directly - people who have actual decision making authority.

Crazy that frontline staff of the actual lender don't seem to have this access, but seems to be the case.

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