The recent release of Auckland Council’s 2014 CV (capital valuation) figures has caused a stir amongst some home owners who have found their property CV has increased by around a third, or in some cases much more. Before you feel too giddy with your new ‘wealth’ we asked Vince Clark, ASB’s Head of Home Lending to explain what this means for homeowners.
So what does it mean for me?
Firstly it is important to remember that CVs may not be the same as market value. Every 3 years Council valuers work with Quotable Value to determine property valuations. In the case of the most recent Auckland Council valuation, capital value is the Council’s assessment of the most likely selling price if your property had been sold on 1 July 2014. Since properties are not physically inspected, the valuation is conducted by the Council in bulk using a variety of commercially acceptable valuation techniques.
The CV figure underpins the calculation of how much ASB can lend someone wanting to borrow money against their home. Understanding how much “equity” you have in the property is important – equity is the difference between the value of the property and how much you owe. So while some home owners have found their equity has boosted due to an increase in their CV, it is super important to remember that the main determinant of how much we can actually lend you is based on how much you can afford. This is commonly referred to as your ability to ‘service the loan’, and as a responsible lender it is essential to us that you are not overburdened with debt and can afford to maintain your mortgage payments.
Can I get a new car, or renovate my house based on the new CV figures?
The short answer is ‘it depends’. You might be eligible for a top-up on your home loan to put in that deck you’ve been wanting for summer, or to replace your car, but once again it will depend on your ability to service any new lending. Talk to us and we’ll take a look at whether you can afford extra loan repayments in conjunction with how much equity you have in your home.
Can I renegotiate my mortgage rate?
Again, it depends. If the recent CV has improved the amount of equity you hold in the property, you may be able to negotiate a better rate when you apply for new lending against your home. New or additional lending may enable ASB to use an updated valuation on that new lending.
What about my Council rates? Do you take into account that they might go up based on the new CV?
When we look at how much you can afford to borrow we do take into account expenses like Council rates, forecasted movements in interest rates and other factors. As a responsible lender we need to ensure that you are not overcommitted if there are changes in the future which might affect your ability to meet your mortgage payments.
If my CV has increased, do I need to adjust my house insurance?
It is important to review the amount your home is insured for on a regular basis, at least annually. Most insurers now offer house insurance based on a specified sum insured amount rather than replacement based on floor area. In the event of a loss that requires a complete rebuild of the property, the insurance company will pay your rebuild costs up to the agreed sum insured.
The CV of your home and the rebuilding of it for sum insured purposes can be quite different. When considering the right sum insured for your home, we recommend you talk to your insurer. Useful information can be found here.
How can I take advantage of the new CV on my home?
Talk to your bank. Tell us what you would like to do and how much you’d like to borrow. Each situation is different and we are happy to chat to customers about their options. You can contact our lending specialists online here or give us a call on 0800 100 600.