What lenders assess
When you apply for a mortgage, lenders look at more than just your income. They want to understand your complete financial picture to assess whether you can comfortably service the loan.
Key factors banks consider:
- Income stability: How long you've been in your job and the reliability of your income
- Spending habits: Bank statements show how you manage money day-to-day
- Existing debts: Credit cards, car loans, buy-now-pay-later, student loans
- Deposit source: Savings history, KiwiSaver, or gifts from family
The stress test
Banks don't just assess whether you can afford today's interest rates. They calculate whether you could still manage repayments if rates increased significantly, often adding 2-3% above current rates.
Why this matters: You might qualify for less than you expect, but this protects you from financial stress if rates rise after you buy.
Debt-to-income (DTI) restrictions
From 1 July 2024, the Reserve Bank introduced debt-to-income (DTI) restrictions. These limit how much you can borrow relative to your income, regardless of whether you can afford the repayments.
Maximum 6x your annual income. For example, if you earn $100,000, you can borrow up to $600,000.
Maximum 7x your annual income. Slightly higher limit for rental properties.
What counts as "income"?
- Salary and wages: Your regular employment income before tax
- Rental income: Existing rental income from investment properties
- Self-employment: Business income (banks usually average 2-3 years)
What this means for you: Even if you could comfortably afford higher repayments, DTI limits may cap your borrowing. If you are buying with a partner, your combined income is used. Talk to your bank or mortgage broker early to understand your borrowing capacity under these rules.
First Home Buyer schemes
Several government schemes exist to help first home buyers get into the market:
Withdraw your KiwiSaver contributions (minus $1,000) after 3+ years as a member
Kāinga Ora underwrites loans with as little as 5% deposit through participating banks
Legal costs to budget for
Beyond the purchase price and deposit, there are costs to factor into your budget:
- Legal fees: For the conveyancing and settlement process
- Title search and registration: LINZ fees for searches and registering your ownership
- Building report: Pre-purchase inspection by a qualified building inspector
- LIM report: Land Information Memorandum from council
We can provide an estimate of our fees early in the process. Contact us on 06 835 7394.
How we help
We work with your bank to ensure the mortgage documentation is in order and settlement goes smoothly.