First Home Buyer Mortgage Advice

Your borrowing power determines how much a lender is willing to lend you, and it depends on more than just your income. Lenders look at your gross income, existing debts (credit cards, personal loans, car finance, student loans), your living expenses, and your deposit size.

In New Zealand, most banks use a serviceability test that assumes a higher interest rate than the current market rate, typically around 6-7%. This means even if today's rates are lower, the bank wants to know you could still afford repayments if rates rise. For a household earning $120,000 per year with minimal debts, borrowing power might be in the range of $550,000-$650,000, but every situation is different.

We run a detailed borrowing power calculation during your free consultation, taking into account your specific income, debts, and lifestyle. This gives you a realistic budget before you start house hunting, so you know exactly what price range to focus on.

While a 20% deposit is the standard requirement in New Zealand, there are several pathways for buyers who have less saved. Kainga Ora's First Home Loan scheme allows eligible buyers to purchase with as little as 5% deposit, with the government underwriting the additional risk for the lender.

Some banks also offer their own low-deposit products, typically requiring 10-15% deposit, though these often come with a Low Equity Premium (LEP) or Low Equity Margin (LEM), which is an additional interest rate margin charged on top of the standard rate. This margin reduces as you build equity in the property.

We help you understand the true cost of low-deposit lending, including any premiums, and weigh it against the alternative of waiting to save more. In a rising market, getting in earlier with a smaller deposit can sometimes be more beneficial than waiting, even with the additional cost. We run the numbers for your specific situation so you can make an informed decision.

A pre-approval (also called conditional approval or approval in principle) is a written confirmation from a lender that they are willing to lend you a specific amount, subject to conditions. These conditions typically include finding a suitable property, a satisfactory valuation, and a clear title search.

Having a pre-approval gives you several advantages. First, it confirms your budget so you can house-hunt within a realistic price range. Second, it shows real estate agents and vendors that you are a serious, qualified buyer. Third, it speeds up the process when you find the right property, as much of the lending assessment is already complete.

Pre-approvals are usually valid for 60-90 days and can be renewed if needed. We recommend getting pre-approved before you start attending open homes, as it puts you in the strongest possible position when you are ready to make an offer.