This article explains the main mortgage lending criteria in NZ, what lenders usually assess, and what can affect your chances of qualifying for a mortgage.
When looking at an application, lenders will consider:
When talking about house deposits, the key term is loan-to-value ratio (LVR). LVR refers to the percentage of the house purchase covered by a loan versus the percentage covered by your deposit.
If you are buying your own home, a main bank will generally want a 20% deposit for an existing home, although some lending above 80% LVR may be available depending on the bank, borrower, property and current lending limits. New builds may sometimes be assessed differently.. For more details, see our blog on how much deposit to buy a house in NZ.
If you’ve been in the KiwiSaver scheme for three or more years and are a first-home buyer, you can use your KiwiSaver towards the deposit.
If you’re buying an investment property, deposit requirements are usually different from owner-occupied home loans. Banks commonly require a larger deposit for investment lending, while some non-bank lenders may consider lower-deposit options, depending on the property, income, equity position and overall application strength.
For more detail, read our guide on buying an investment property with a 10% or 20% deposit.
New builds may be treated differently from existing investment properties, so it is worth getting advice before assuming what deposit you will need.
When lenders look at whether an applicant can afford a loan they consider the person’s income, debt, and expenses/spending habits. They then calculate the mortgage repayments at a higher interest rate than what is current. This higher interest rate test is to ensure that clients can maintain their loans even if interest rates increase.
As of 1 July 2024, debt-to-income restrictions apply to new residential bank lending in New Zealand. A DTI ratio compares your total debt with your gross income. In general, borrowing above six times income for owner-occupiers, or seven times income for investors, is treated as higher-DTI lending. Banks can still approve some lending above these thresholds, but only within restricted limits.
If you have been self-employed for less than two years, getting a mortgage with a bank may be more difficult because lenders usually want to see a stable income history. There may still be other options outside the main banks. Read our guide on getting a mortgage when self-employed for less than two years.
Lenders need to be satisfied that a loan is affordable for the borrower. As part of their assessment, they may review recent bank statements, expenses and spending patterns. Discretionary spending, such as meals out or holidays, may be treated differently from fixed commitments because some expenses can be reduced if needed.
Lenders can’t judge you based on age, but they still need to ensure you meet the lending criteria. The average loan term is 25 or 30 years, so getting a mortgage later in life could mean you end up with mortgage debt when you retire.
So, how do older people buy a home? Ways to increase your chances of loan approval later in life include:
The phrase “you are never too old” rings true, although there will be some added complexities that your mortgage broker will deal with. All lenders have different rules, but that is for your adviser to worry about!
When you apply for a mortgage in New Zealand, lenders check your credit score and credit file carefully to determine the amount of risk in lending to you. They find out if you are a high or low credit risk by examining information from credit reporting agencies such as Centrix, Equifax and Experian/illion.
Paying your bills on time will help maintain a good credit history and improve your mortgage options. For more information, check out our blog on everything you need to know about credit scores.
If your credit rating, defaults, missed payments or credit history may affect your application, read our guide on getting a mortgage with bad credit.
Contact us to chat about your credit scores and your possibilities to get a mortgage.
Angela is an accredited Financial Adviser, licensed under FSP742251 and has been in the Financial Industry since 2006. Our 5-star Google reviews reflect the excellent customer experience we promise — making your home loan journey positive, stress-free, and rewarding. At Platinum Mortgages, our clients are the reason we exist — so you can be confident every step is guided by genuine care and expertise.
