Compare the rates
Five major banks write 94% of mortgages in New Zealand, which makes them our 'big five'.
The Big 5 Lenders
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These are some of the lowest mortgage rates we’ve ever seen and they won’t last forever.
Lending criteria is becoming stricter so make sure your current mortgage structure is future-proofed.
Changing how your mortgage is set up could free up much needed cash flow.
With just a little discipline you can pay your mortgage off years faster and save a serious amount of money.
Maybe your mortgage is well structured and makes managing a budget too hard.
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Buying your first home
It's best to have pre-approval for a mortgage in place before seriously looking at houses. Pre-approval will give you a realistic idea of how much you can borrow, and how much deposit you need. It won’t tell you a lot about what sort of deal you’ll get as rates and cash backs are negotiated when you put a house under contract and before mortgage documents are finalised.
If you have more than 20% equity in your home, you're likely to get a cash back offer if refinancing from one bank to another. Cash backs are worth 0.50% - 0.80% of your mortgage balance and the amount also depends on what rates you get. The better the rates, the lower the cash back. Mortgage brokers are constantly negotiating rates, so are in a good position to know what deals are available.
Buying an investment property
Lenders are tightening up their criteria and property investors who have commercial properties in their portfolio, or more than six residential rentals are increasingly being charged slightly higher mortgage rates. With more capital changes in the pipeline, the rate difference between investment property and owner-occupied property is likely to become greater. Make sure you have a plan.
Top 5 FAQs
When purchasing an owner-occupied property you can generally borrow around five times your gross annual income. Lenders will require evidence that you're in a position to service the mortgage based on paying it off over 30 years, and at a mortgage rate of around 7.50% (higher than actual rates). If you have a rental property, 75% of the rental income can be included for testing your ability to afford the loan.
Banks offer better mortgage rates (and cash backs) to customers that have at least a 20% deposit. You must have at least a 10% deposit to access your KiwiSaver, so this is where most lenders draw the line. Banks are permitted to have 15% of their owner-occupied borrowers with less than 20% deposit. The cut-off for rental properties is a 30% deposit.
New properties are exempt from Reserve Bank restrictions, making it possible to buy a new property with as little as a 5% deposit, but the issue with KiwiSaver still applies.
90% of the market is on fixed mortgage rates because they are lower than floating rates. The most popular fixed rate term is the 2-year term as it tends to be the term that banks compete the most aggressively on. Longer term fixed rates provide more certainty. When mortgage rates are low it can be a good time to consider fixing into a longer term fixed rate. Be wary of early repayment fees, and if you repay a fixed rate mortgage early you might have to pay a cost.
Splitting your home loan across multiple fixed rate terms means your entire loan won't mature at once. It allows you to always have part of your loan maturing that you can make lump sum payments into as well as the certainty of having part of your loan still fixed. If mortgage rates are going up, splitting your loans will smooth out the impact and make it easier to adjust to higher rates.
When you repay a fixed rate loan early, the lender also needs to break its fixed rate funding. This is a real cost to the lender, which the lender passes on to you as a fee. These costs only typically occur if mortgage rates drop between when you fix and when you repay. Roughly it’s the rate difference applied to the loan balance over what would have been its remaining fixed rate term.