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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Ultimate Geek

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#2160744 14-Jan-2019 09:19

The bank has to give approval to allow a second mortgage.

It is not allowed to give an approval if the combined lending (bank + other lender) exceeds the lvr restrictions .

It's unlikely this is the case in this scenario as a) I read the deposit is a gift and b) family don't often take second mortgages for family loans

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mdf

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#2160779 14-Jan-2019 10:37

Linux:

OK just another update from my parents property lawyer! She is saying the bank are incorrect and she can see no limit on Gifted deposit and if I can service the debt she can't see what the fuss is about!

So I am now calling the bank to find out what they are smoking as the CEO was involved

John

Good luck!

Obviously sorting it out properly is the first best option, but are you pressed for time (settlement dates, tender closing, auction date etc.?). From the sounds of things, renting it out for a bit was just something you were considering and you can service the mortgage without necessarily having rental income. If you need to get it moving, another option could be to tell that bank your circumstances are flexible (which sounds as though it is true) and if it would make a difference to their lending criteria you can owner-occupy it.

eracode

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#2160798 14-Jan-2019 11:01

logo: The bank has to give approval to allow a second mortgage.

It is not allowed to give an approval if the combined lending (bank + other lender) exceeds the lvr restrictions .

It's unlikely this is the case in this scenario as a) I read the deposit is a gift and b) family don't often take second mortgages for family loans

Yes - now I see clearly you’re correct - if there’s a second mortgage the second debt does get counted in the LVR calculation. I was wrong on that point and stand corrected - my apologies.

No excuses but I don’t recall that from my days as as a banker (retired five years ago). Maybe it’s new as part new RBNZ regs - or maybe it was always there and I was ignorant of it.

Sometimes I just sit and think. Other times I just sit.

Geektastic

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#2160810 14-Jan-2019 11:19

Linux:

Geektastic:

OK. Here's an alternative plan.

1) Buy house with 25% deposit on floating rate loan

2) Go to bank the following day and use remaining "deposit" monies to pay off part of the loan

3) Fix the remainder as required

Then smile and tell bank to STFU...!

I wish it was that simple but the issue is disclosure!

That is what I said to my personal bank manager fine then make the deposit $1 under the 50% of this rule

Cause I have disclosed the deposit amount I can't change my deposit amount

John

Of course you can, it's up to you what you do with that money - you might decide to buy a Porsche with part of it tomorrow. As long as you have no contract with the bank, you can do what you like.

If they say otherwise, tell them to kiss your Geek butt and go and see another bank.

Edit - stuff like this is why I highly recommend a good mortgage broker. A good one knows the ways around any of these ridiculous bureaucratic road blocks.

eracode

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#2160822 14-Jan-2019 11:35

Linux:
OK just another update from my parents property lawyer! She is saying the bank are incorrect and she can see no limit on Gifted deposit and if I can service the debt she can't see what the fuss is about!

So I am now calling the bank to find out what they are smoking as the CEO was involved

John

Storm in a teacup? Great to hear that though.

Sometimes I just sit and think. Other times I just sit.

ajobbins

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#2160824 14-Jan-2019 11:37

suff like this is why I highly recommend a good mortgage broker. A good one knows the ways around any of these ridiculous bureaucratic road blocks.

+1, for this and other reasons. Brokers often have direct access into the decision teams within the lenders, and can often negotiate a better rate that you could as an individual.

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tdgeek

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#2160826 14-Jan-2019 11:40

Geektastic:

Edit - stuff like this is why I highly recommend a good mortgage broker. A good one knows the ways around any of these ridiculous bureaucratic road blocks.

As it happens the whole thread never amounted to a road block. But how can a bank be so wrong?? When we sold and re bought, the bank person we dealt with was an under 30 Asian girl. She knew everything, inside and out.

The restrictions by a bank, your bank, Reserve Bank are very few in number, its not rocket science. Its just a few points with number limits on them. Formulas for affordability, loan limits. Not really a lot to know. I'd love to see what this bank tells John re why there was the problem

surfisup1000

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#2160827 14-Jan-2019 11:40

eracode:

Storm in a teacup?

I'm not sure I'd agree, OP's loan application was still declined. Seems pretty major to me.

Linux

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#2160847 14-Jan-2019 12:17

eracode:
Linux:

OK just another update from my parents property lawyer! She is saying the bank are incorrect and she can see no limit on Gifted deposit and if I can service the debt she can't see what the fuss is about!

So I am now calling the bank to find out what they are smoking as the CEO was involved

John

Storm in a teacup? Great to hear that though.

@eracode Well it could a storm in a tea cup! The CEO of this major bank go involved and went to the reserve bank and they advised ' No '

Clearly the new rules are confusing staff at the bank and at the reserve bank! I am the one just stuck in the middle here!

John

eracode

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#2160848 14-Jan-2019 12:19

Linux:
eracode:
Linux:

OK just another update from my parents property lawyer! She is saying the bank are incorrect and she can see no limit on Gifted deposit and if I can service the debt she can't see what the fuss is about!

So I am now calling the bank to find out what they are smoking as the CEO was involved

John

Storm in a teacup? Great to hear that though.

@eracode Well it could a storm in a tea cup! The CEO of this major bank go involved and went to the reserve bank and they advised ' No '

Clearly the new rules are confusing staff at the bank and at the reserve bank! I am the one just stuck in the middle here!

John

Thanks - would love to know what they were thinking.

Despite that, I can’t help thinking there’s still something missing here.

Sometimes I just sit and think. Other times I just sit.

frankv

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#2160851 14-Jan-2019 12:26

Linux:

Aredwood: Do you have any links or information about the new rules? As I don't understand why setting a max deposit size could be a benefit.

Contact a good mortgage broker, and maybe get a mortgage from a finance company. As finance companies have less restrictions on lending.

Can you just borrow more money, get a floating rate loan initially. Then repay that money a day or two after drawdown.

I wish it was that simple the issue is a have disclosed the deposit amount to a bank, I now can't go to another bank or mortgage broker!

Issue is 100% not the banks my parents lawyer has explained to the real estate agent the issue with the new rules stopping the mortgage approval

John

Your circumstances have changed; you now have an opportunity to buy a Ferrari at a good price. So now you want a mortgage with less than 50% deposit. If, after you've got the mortgage, you find the Ferrari isn't as good as you were led to believe so you don't buy it, use the extra money to reduce your mortgage.

Problem solved.

jonathan18

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#2160855 14-Jan-2019 12:40

In the context of this thread (not saying that it applies to the OP's circumstances), this makes interesting reading:

Mortgage brokers say banks are taking a closer look at whether borrowers can afford to meet home loan repayments, with one bank now asking for a written declaration that the lending is responsible.

https://www.oneroof.co.nz/news/35842?ref=nzhhome

Linux

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#2160883 14-Jan-2019 12:54

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

John

eracode

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#2160892 14-Jan-2019 13:02

jonathan18:
In the context of this thread (not saying that it applies to the OP's circumstances), this makes interesting reading:

Mortgage brokers say banks are taking a closer look at whether borrowers can afford to meet home loan repayments, with one bank now asking for a written declaration that the lending is responsible.

https://www.oneroof.co.nz/news/35842?ref=nzhhome

That’s very interesting but I guess not too surprising.

When I was working in banking (left five years ago) staff appraisals and bonuses for lending staff were based primarily on lending volume and meeting very high volume targets. The banks used to deny that but it was true - what was important and how you were measured was by how much lending you shovelled out the door. The obvious reason was that more lending > more profit > growth in share price that drove senior management’s own key performance measures and bonuses.

Following the embarrassing Aussie commission of enquiry, the banks have had to rethink their ethics on lending and on how they measure staff performance.

Sometimes I just sit and think. Other times I just sit.

eracode

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#2160893 14-Jan-2019 13:04

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?

Sometimes I just sit and think. Other times I just sit.

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