FAQs

In July 2024, new debt-to-income (DTI) rules were introduced in New Zealand, limiting how much you can borrow to buy a house based on a multiple of your household income.

The limit varies depending on why you're buying the property—capped at six times household income for owner-occupiers and seven times household income for property investors. That said, if you're a really credit-worthy borrower, banks do have discretion to do up to 20% of their lending over these limits.

Then, of course, the banks will also want to look at the specifics of your financial situation—including expenses and any existing debt—to make sure you're in a position to comfortably service the mortgage over a 30-year term. Banks use “test” rates, which sit anywhere up to about 2% above fixed-mortgage rates, as part of their serviceability calculation, to ensure that (even if mortgage rates were to rise) you'd still be able to afford the loan.

If you have a rental property, banks will factor in a maximum of 80% of the rental income into their servicing calculations to determine whether you can afford the loan.

Again, the rules vary depending on why you're buying the property, and the type of home you're buying.

If you plan to live in the home, you may (in some circumstances) be able to buy with as little as 5% deposit—although the standard deposit on a new build property is 10%, and 20% on an existing property.

For owner-occupiers, the “golden number” is 20%, and lenders will generally be willing to offer better mortgage rates (and cash back deals) to customers who meet that threshold.

If you're buying an investment property, you'll need at least a 30% deposit when it comes to buying an existing property, or 20% for a new build.

Mortgage advisers have access to a whole range of different lenders (both banks and non-banks) which means you get more choice and a better chance of finding the right mortgage solution for you.

If your financial situation isn't entirely straightforward—perhaps you're working with a low deposit, servicing's a bit tight, or you're self-employed (for example)—a good mortgage adviser can go into bat for you to help get your loan application across the line. And having someone negotiating with the banks on your behalf can help to take a lot of the stress out of the situation.

The key thing is choosing a broker who's unbiased, and has access to all (or most) lenders to ensure you're getting the best possible deal.

If you' re confident you fit bank lending criteria, and your preference is to go straight to the bank, make sure to use it as an opportunity for negotiation. Many lenders are often willing to waive fees or offer discounts on day-to-day banking costs when you take out a mortgage with them.

Remember though, that a personal banker only works for one lender (which means they have fewer mortgage solutions at their disposal) and will be limited in how much advice they can give.

This is a tricky one—as it all depends on your personal situation. But don't assume the lowest rate is always best!

Thanks to the flexibility they offer, one-year fixed rates are really popular among Kiwi borrowers, which means it's a highly competitive space for the banks, and you can be pretty confident you're getting a good deal.

Fixing longer-term may make sense in some situations, but beware that if your circumstances change (i.e. you decide to sell or refinance) and you want to pay off your loan early, you may be hit with hefty break fees which could set you back thousands.

It's always a good idea to chat to a mortgage broker for guidance on the right loan term for you and your situation.

Splitting your mortgage is basically where you divide it up into two (sometimes more) smaller loans, and structure them across different fixed-rate terms.

If you split your mortgage in such a way that you have part of your loan coming up to maturity every year or so, that will give you more freedom to make regular lump sum payments without penalty—while also having the certainty of having part of your loan still fixed.

In a rising rate environment, splitting your mortgage can be really helpful in terms of easing the transition to higher mortgage costs, because it's happening in stages rather than all at once.

When interest rates are falling, splitting your loan across different terms means you'll be able to take advantage of lower rates sooner—and also helps you avoid having to pay such significant break fees (should you want to sell or refinance) if you haven't fixed your entire loan long-term.

These days, a lot of lenders are offering mortgage cash back deals to new customers—which is essentially where they pay you a lump sum, in cash, once you've settled on your mortgage.

The size of the cash back is calculated as a percentage of your total loan amount, generally between 0.60% and 1.00%, depending on the lender. So, if you're borrowing $600,000, for example, you could get up to $6,000 back in your pocket.

To be eligible for a mortgage cash back, you'll either need to be taking out a new loan (i.e. when you first buy a house) or refinancing your existing mortgage from another lender.

All cash backs are subject to a clawback period of between three and four years, depending on the bank. That means if you change banks before you're through your clawback period, you'll have to repay some (or all) of the cash back amount.

A break fee is the penalty incurred when you decide to repay your fixed-term mortgage before maturity (i.e. in order to refinance or sell your home), and interest rates have fallen since you fixed.

The fee covers a very real cost to your lender. When you break your loan early, that forces your bank to break its own wholesale funding arrangements—which it gets penalised for, and so it passes that penalty onto you (the end borrower) in full.

Exactly how much you'll pay depends on the size of your mortgage, how far rates have fallen since you fixed, and the length of time remaining on your fixed loan term—but they can set you back thousands.

Having existing debt can limit how much you're able to borrow for a mortgage. That's because, when the banks look at your serviceability, they won't be able to factor in any income that's tied up in paying off other debts.

That said, lenders take a holistic view of your financial position when assessing your application—so as long as you can still comfortably service your loan, having existing debt won't necessarily prevent you from getting an application across the line.

Just bear in mind that the less debt you have, the higher your borrowing power is going to be.

In simple terms, the answer is no.

But depending on how much you've saved towards your deposit—if it's more than 20%, or even (in some cases) more than 10%—it may be worth using some of those funds to pay down any other debts.

If your deposit is greater than 10%, but less than 20%, the banks will consider that to be a “low deposit” mortgage, and it really doesn't matter which end of the spectrum you're at, you'll get the same terms.

So, if you're well over 10%, but 20% is out of reach, you could have more to gain by using some of your deposit to pay off debt instead.

It's always worth chatting to a mortgage adviser before diving in, to find out whether this strategy is right for you.

There are a few ways to potentially use your parents' property/equity to help you purchase your own home.

The most important thing to find out first is whether or not your parents have equity available in their home, and if they're still earning an income.

Under the Responsible Lending Act, banks are required to make sure your parents meet servicing standards and, depending on the level of their income, this will determine which options may be available for them to access and allow you to use their equity.

Unfortunately, not. You can only tap into your KiwiSaver to help with purchasing an owner-occupied home (i.e. one you're planning to live in yourself).

It depends. If you've previously owned a home in New Zealand, you may qualify for a second-chance KiwiSaver withdrawal—as long as you:

• Have never before used your KiwiSaver to help fund a house purchase
• No longer have any shares / interest in any property in New Zealand (excluding Māori land ownership)
• Don't have access to funds which contribute to at least a 20% deposit, then there is a possibility that you can access your KiwiSaver again for another home purchase.

You'll also need to confirm your eligibility with Kāinga Ora. To find out more information, and full eligibility criteria, check out the Kāinga Ora website.

Rate of the Day is what we consider to be the best value mortgage rate for a loan with a loan-to-value ratio below 80%, available both to new and existing borrowers, and that is not limited by the size of the loan.