I was asked this question the other day. The really funny thing was that I thought everyone knew the answer was ‘yes’. Clearly I spend too much time reading lending criteria instead of engaging in the real world!

To borrow over 80%, you need to be in good financial shape and be able to meet tougher lending criteria. That includes not only having a good surplus of income over and above your proposed loan repayments plus living costs, but also demonstrating good behaviour and a good track record.

A good track record includes things like – you’ve been in your job or occupation for at least 12 months and you can show you’ve saved your deposit yourself. Together that shows reliability and commitment which are both important to the bank. The thinking is that if you behave well in terms of your job etc then you’ll be the same when it comes to making your loan repayments.

Good behaviour includes other things like – you don’t have a whole heap of HP’s or car loans and your bank statements don’t show any misdemeanours like bounced payments.

You also need to be prepared for additional costs. For example a registered valuation on the property is compulsory. And since the bank is taking on more risk when it lends over 80% they’ll ask you to compensate for that by either paying a slightly higher interest rate (usually on a sliding scale from 0.25 to 1% above the advertised rates) or by paying an upfront fee (can be added to your loan). So be prepared for that.

We also strongly recommend you have a solid life insurance package. It’s not compulsory but when borrowing a large amount of money it makes no sense to leave that risk unprotected.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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