Purchase price versus registered valuation on an apartment with a proposed levy

Policy LVR is loan divided by the lower of purchase price and valuation: $736,000 / $865,000 = 85.1%. Using the purchase price would give 80.0%, but the policy expressly requires the lower of price and valuation. A recent arm's-length sale is evidence of value, but it does not override a panel valuation that identifies a building defect and a proposed levy. The valuer's $865,000 figure is the lender's security value for LVR purposes unless the valuer revises it. At 80% of $865,000, the maximum loan is $692,000. The borrower therefore faces a $44,000 shortfall ($736,000 - $692,000), not just a slightly higher LVR. The $31,000 per-unit levy also matters because it may reduce net sale proceeds or require the borrower to fund it after settlement. The lender should check the body corporate minutes, the weathertightness report and whether the levy is confirmed. If the valuation is not revised and the borrower cannot close the gap, the loan cannot be approved at the requested amount under policy.

A guarantee is not a substitute for the valuation of the primary security. It may strengthen the application by providing additional recourse or, under some policies, additional security, but the lender must confirm how its policy and the RBNZ LVR rules treat a guarantee. A limited guarantee over a mortgage-free home can reduce the lender's loss if the borrower defaults, but it does not make the apartment worth $920,000. The lender should not simply reclassify the loan as 80% LVR because parents are involved. The guarantors need independent legal advice, a clear explanation of the guarantee amount and duration, and an assessment of their own ability to meet the guarantee without substantial hardship. The guarantee should be limited to a specific sum and released when the LVR falls. If the parents' home is their only significant asset, the lender should consider whether the guarantee is oppressive or beyond their means. Better solutions may be a lower purchase price, a gift or loan to cover the $44,000 gap, or a different property.

The lender should record the valuation, the LVR calculation, the levy risk, the body corporate information, and the reason for any exception. Conditions should include a satisfactory solicitor's report on the body corporate and the levy, confirmation of insurance, and evidence of the additional $44,000 or a revised loan structure. If LMI is proposed, the lender must confirm the insurer will accept the property and the LVR; LMI protects the lender, not the borrower. The lender should also check the borrower's ability to service the loan plus the levy and any remediation costs, not just the mortgage payment. Settlement timing is a risk: 25 working days is short, and a condition requiring a revised valuation may not be met in time. The lender should not issue an unconditional approval before the conditions are satisfied. If the levy is confirmed after settlement, the borrower may face a large unexpected cost, so the lender should stress-test that scenario and document the decision.