Property Portfolio LVR Calculator

Investors tend to assess properties one at a time, and banks do not. A lender looks at every property you own as a single combined exposure, frequently with the securities cross-collateralised, which means a strong property can be quietly funding a weak one without your ever seeing it on a statement. This calculator aggregates up to six properties into that one lending position and returns what the bank sees: total value, total debt, the portfolio loan-to-value ratio, and the LVR of each property measured against its own limit, with owner-occupied lending assessed at 80% and investment lending at 70%. Where a property sits above its limit, the excess is netted off the equity available elsewhere rather than quietly ignored, because that is how a lender holding all the securities will treat it. The page then flags which property is constraining the portfolio, since paying down that one loan usually releases more borrowing capacity than spreading the same money across every loan. Finally it checks servicing as well as security, because equity gets a loan approved in principle and servicing gets it approved in fact, and on most New Zealand portfolios servicing is the binding constraint.

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Banks Assess The Position, Not The Property

The single most common mistake an investor makes when planning the next purchase is to analyse it in isolation. The deal stacks up, the yield is fine, the deposit is available, and then the application is declined for reasons that appear to have nothing to do with the property being bought.

That happens because the lender is not assessing the property. It is assessing you, and every property you already own, as one combined exposure. Where securities are cross-collateralised, which is common for investors who have grown a portfolio with one bank, there is not really a separate loan on each house at all. There is one facility secured over everything.

Worked Example: Three Properties, One Problem

Take the defaults. A family home worth $850,000.00 with a $430,000.00 loan, Rental A worth $620,000.00 with $425,000.00, and Rental B worth $495,000.00 with $360,000.00. Total value $1,965,000.00, total debt $1,215,000.00, portfolio LVR 61.83%.

That headline looks healthy. Underneath it, the picture is uneven. The home is at 50.59% against an 80% limit, with $250,000.00 of headroom. Rental A is at 68.55% against a 70% limit, with $9,000.00. Rental B is at 72.73% against the same 70% limit, which puts it $13,500.00 over.

Gross headroom is $259,000.00. Netting off Rental B's overhang leaves $245,500.00, and that is the figure a lender holding all three securities would work from.

The Constraining Property Is Worth Finding

Rental B is the constraint. It is not a bad property and its rent is fine; it is simply carrying more debt than its own value supports, and the excess is being drawn from the equity in the other two.

The practical consequence is that $13,500.00 applied to Rental B's loan is worth considerably more than $13,500.00 spread evenly across all three. It removes the overhang entirely, restores the property to its limit, and unlocks the full $259,000.00 of gross headroom. Targeting the constraint rather than the total is one of the few genuinely free improvements available to a leveraged investor.

Servicing Is Usually The Real Constraint

Equity answers whether a bank has enough security. Servicing answers whether you can afford the repayments, and on most New Zealand portfolios it is the tighter of the two tests.

The portfolio collects $59,280.00 of gross rent. Banks do not count all of it: a shading of around 75% allows for vacancy, rates, insurance, maintenance and management, which brings the counted figure to $44,460.00. Against investment debt of $785,000.00, annual debt service at 6.25% is $58,000.56, giving a DSCR of 0.77.

Then the bank tests you at a rate you are not paying. At 8.5% the service rises to $72,431.65 and the ratio falls to 0.61. Both are below 1.00, which says plainly that the rentals do not fund themselves and the gap comes from salary. That is a normal position in New Zealand, and it is also the reason portfolio growth so often stalls while the owner is still looking at their equity and wondering why.

Use LVR, Not Gearing

Gearing is used loosely to describe the ratio of debt to equity, and in Australian usage negative gearing refers specifically to offsetting rental losses against other income. New Zealand ring-fenced residential rental losses from the 2019-20 income year, so that concept does not transfer, and using the word invites exactly the wrong assumption.

Loan-to-value ratio is the term your bank uses, the term the Reserve Bank restrictions are written in, and the one that will not lead you into a tax position that has not existed here for years. Our Property Deal Analyser shows what ring-fencing does to a single deal's after-tax cost.

Before You Go To The Bank

Three checks are worth running in order. First, this page, to know your combined position and your constraint. Second, our Borrowing Capacity Calculator, which works the servicing side from your income rather than from rent. Third, our Debt Service Coverage Ratio Calculator if you want to model a single property's coverage in more detail.

Turning up with those three answers already worked out changes the conversation considerably, and it means you find out about a constraint from your own spreadsheet rather than from a decline.

Related NZ Property Lending Calculators

• LVR Lending Capacity Calculator: the same limits applied to a single purchase.
• Borrowing Capacity Calculator: how much a bank will lend based on your income.
• Debt Service Coverage Ratio Calculator: coverage on a single property in detail.
• Property Deal Analyser: underwrite the next purchase before you add it here.
• Home Equity Calculator: equity in a single property.