You may be wondering whether getting a mortgage with existing debt in NZ is possible. In many cases, lenders will still approve borrowers with personal loans, student debt, or credit-card liabilities depending on overall affordability and account conduct.
This guide explains how banks assess debt when reviewing a mortgage application, and what to do if the answer is “not yet”. We’ll also cover non bank options that can help you move forward while you work toward bank approval.
If you’d like to understand how credit-card balances or limits affect mortgage borrowing calculations, see our separate guide on Credit-Card Debt and Borrowing Power.
The best option depends entirely on personal circumstances.
When reviewing a mortgage application, the banks look at three things relating to debt:
First, they will deduct any loan payments when calculating your income. Let’s say you have an income of $50,000 per annum after tax. You also have loan repayments totalling $10,000 per annum. The bank will reduce your calculated income to $40,000. Sometimes, if the loan amounts and types show a pattern of high discretionary borrowing, the bank may consider whether the applicant is going to responsibly manage the financial obligations of a mortgage.
When it comes to student debt, the banks aren’t usually concerned by the amount. This is because the loan repayments are always based on the person’s income, not how much is owed. And student debt is considered ‘good’ in that it likely has improved the person’s earning prospects in the long run. Given that some professions require students to go into debt in the hundreds of thousands, this is a big relief for many prospective homeowners!
It’s important to be aware that the bank doesn’t look at when the term of a loan is up. If you’re a couple of months away from paying off your car loan at the time of applying, the bank won’t take that into account. Instead, they’ll calculate your income as if you are making those loan payments for the foreseeable future. For this reason, it can sometimes be helpful to reduce certain debts earlier. That would mean however that you’re likely to reduce your deposit, so it’s a bit of a balancing act. We can help you decide what the best move is for you.
Liability refers to any credit card or overdraft limits. When it comes to credit cards and overdrafts, the bank doesn’t look at how much you currently owe. Instead, they will calculate your debt using the assumption that you will spend up to your credit card and overdraft limits. So, a great first step to getting your finances in order is always to reduce your limits down as much as possible. This will increase your “income” as the bank sees it. For more detail, see our guide on Credit Card Debt and Mortgage Affordability.
Finally, they will look at your credit score. This will reflect any “bad debt” you may have. Generally speaking, your credit history may also reflect missed payments, defaults, or other past credit events that lenders consider during assessment. You may not be aware that credit inquiries also reduce your credit score. Every time you apply for a hire purchase scheme or credit card etc. your credit gets checked, impacting your score.
It can be frustrating if your mortgage application is declined because existing debt levels affect servicing calculations. You may have stable income and manageable repayments, but existing liabilities can still reduce borrowing capacity under bank servicing models. For more on why banks decline applications and how to move forward, see our Bank Said No services.
This is where non bank lending services for borrowers with debt are ideal, offering approvals while you work toward being bank-ready again. Specialist lenders assess applications differently from mainstream banks and may consider borrowers whose existing debt levels fall outside standard servicing criteria. These lenders fill an important space in the market and provide loans to people who can afford a mortgage but aren’t able to get a loan with a bank. You can also read our guide to non bank lending in New Zealand to understand how specialist lenders assess debt and borrowing capacity differently.
Getting a home loan with debt in NZ is about showing affordability and clean account conduct, not perfection.
Some specialist lenders are willing to consider borrowers whose existing debt levels fall outside standard bank servicing models. To enable them to take risks, they charge a higher interest rate than the banks. Higher interest rates and fees should always be considered carefully alongside the long-term lending strategy. In many cases, specialist lending is used as a temporary pathway while borrowers work toward meeting mainstream bank criteria over time. For a balanced view of benefits and drawbacks, see our guide on the Pros and Cons of Non Bank lenders. The key thing is to go in with a plan to get your finances tidied up to the point you can go to a bank within a couple of years.
We love supporting clients into their first home through a non bank lender – and then helping them into a mortgage with a bank a year or so later. Once our clients have a mortgage with a bank (and therefore lower interest rates) we encourage them to continue to make the same payments as when they were paying more interest. This means the mortgage gets paid down faster and saves them huge money in the long run than if they’d just been making the minimum payments.
Type of Debt |
Impact |
Comment |
Credit Card |
Low to High | Depends on Limit / Balance |
Buy Now Pay Later |
Negligible | Can be overlooked |
Student Loan |
Negligible | Often acceptable |
Personal Loan |
Low to High | Depends on balance |
So debt, or at least the type of debt, and its impact on getting a mortgage with debt, varies and each lender has their own rules and criteria.
Some lenders may still consider borrowers with existing debt where overall affordability and account conduct remain acceptable. Understanding how lenders assess existing debt and borrowing capacity can help clarify which lending pathways may be available.
At Platinum Mortgages, we help borrowers understand how existing debt may affect mortgage approval and which lending pathways may still be available. Along the way, we can also explore specialist lenders who provide flexible solutions while we map your plan back to the main banks.
Where appropriate, the focus is often on creating a structured pathway toward stronger long-term lending outcomes and eventual mainstream bank refinancing. The goal is to help borrowers understand their options clearly and structure lending in a way that supports longer-term financial stability.
Every lending situation is different, and understanding the available options starts with a clear assessment of income, liabilities, and borrowing position. If you would like to discuss your situation further, contact us for a confidential assessment.
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.
