You may be wondering can I get a home loan with debt in NZ? Yes, even with personal, student or credit-card debt, many Kiwi borrowers are still approved for home loans every day.
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 borrowing power, see our separate guide on Credit-Card Debt and Mortgage Affordability.
The best option depends entirely on personal circumstances.
How Banks View Debt When You’re Applying for a Home Loan in NZ
When reviewing a mortgage application, the banks look at three things relating to debt:
- Current debt
- Liability
- Credit score
Current 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 ‘reckless’ spending, the bank may consider whether the applicant is going to responsibly manage the financial obligations of a mortgage.
Does the bank care about big student loans?
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!
Does the bank care about loans that are nearly paid off?
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 a good strategic move to pay off a debt sooner. 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
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.
Credit Score
Finally, they will look at your credit score. This will reflect any “bad debt” you may have. Generally speaking, bad debt means late or missed payments for loans and bills, tax debts and defaults and bankruptcy. 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.
What Are My Options When My Mortgage Application is Declined By the Banks?
It can be really disheartening if you get your mortgage application declined due to bad credit. You may have tidied up your finances and be in a secure financial position but due to your credit history the bank won’t lend to you. 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. We’re not talking about those shady finance companies that charge 8% interest per week and encourage you to go into debt for a holiday or a flash car. 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.
Why Can Non Bank Lenders Give Me a Mortgage When the Banks Won’t?
Getting a home loan with debt in NZ is about showing affordability and clean account conduct, not perfection.
They can approve mortgage applications that the banks have deemed too risky. To enable them to take risks, they charge a higher interest rate than the banks. This isn’t something to fear, you just need to factor the cost into your budget. It’s the price to get you into the property market now and secure a big asset for your future. They’re a great short-term solution to get into your own home. 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.
Debt Impact on Borrowings Summary
| 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 have their own rules and criteria.
So Yes – You Can Get a Mortgage with Debt or Bad Credit
Even if you have existing debt, getting a mortgage is still possible. They secret is having he right advice to understand your options and maximise your chances of approval.
At Platinum Mortgages, we specialise in solutions for people who have been declined by the banks – guiding you through our Bank Said No services – so you don’t hit a dead end. Along the way, we can also explore specialist lenders who provide flexible solutions while we map your plan back to the main banks.
We’re here for the long haul – from putting a plan in place, managing the loan process, and securing the right structure, to refinancing and supporting you as life changes. Our goal is simple – helping you achieve home ownership sooner and setting you up for long-term financial security.
If there’s a way forward, we’ll find it for you. Get in touch today for a free consultation and take your first confident step toward approval.
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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.