Buying guide
Getting a mortgage? Here are 15 tips for first home buyers
Let’s get your finance sorted
Last updated: 8 August 2024
Getting a mortgage in New Zealand can be tricky, especially for first home buyers. But with a lot of saving, some planning and a little help - it’s doable.
To help you get started here are 15 tips from the experts that’ll get your application over the line.
How to get a mortgage in New Zealand
1. Get professional advice
If you don’t know what you’re doing it’s always better to get impartial advice from an expert. Speak to a mortgage broker as soon as you’ve decided you want to buy a home and they’ll tell you exactly what you need to do to get your home loan application ready and approved.
2. Shop around
Don’t go straight to your current bank by default. Check the interest rates on offer at several banks first to find the best deal - or get a mortgage broker to help you shop around.
3. Never overcommit
You should only borrow what you need and what you can easily afford to repay. As a rule of thumb your repayments should be less than 30% of your gross pay, and you should have savings put aside just in case. Borrowing less will make having a mortgage easier and that lenders are more likely to approve your application.
4. Keep your accounts clean and tidy
Before applying for a mortgage you should make sure your accounts are looking good. Avoid having a record of going into unarranged overdraft or having payments bounce, as this might make lenders think you can’t manage your mone
5. Check your credit score
Your credit report and credit score is a record of all borrowing you’ve done that lender’s check when you’re getting a mortgage in NZ. It’ll include all debt you hold, credit you’ve applied for, and any payments you’ve missed. You can find out what it is with one of three credit reporting agencies in New Zealand Centrix, Equifax and illion.
If there are any inaccuracies in your report contact any of the above agencies to correct it.
6. Understand your spending & create a budget
Lenders want to see that your finances are organised and you’re spending less than you earn. To make sure this is the case it’s a great idea to create a budget including all your income and expenses. You could use a good old-fashioned spreadsheet to do this, or smart budgeting applications like PocketSmith.
7. Get rid of bad debt
If you’ve got credit cards, hire purchase cards, personal loans, Afterpay or other forms of consumer debt, it’s time to get rid of them. Paying this stuff off before you make a home loan application will increase your chances of approval.
Banks consider these repayments as expenses, which will decrease the amount of debt you are able to afford under their calculations.
Step one towards buying a house is always sorting finance.
8. Get proof of employment and income
Your lender is going to want to see proof that you’re employed and will continue to earn an income. If you’re on a salary, dig out your most recent employment contract - if you’re self-employed, you’ll need at least two years of financial statements (tax returns may be enough).
If you've been self employed for less than two years this is going to be a tough box to tick - talk to a mortgage broker for help with finding a solution.
9. Don’t make any big changes
When you’re applying for a mortgage, lenders like to see that you’re reliable, steady and dependable. They want to know that your income and expenses are unlikely to change any time soon - meaning you’ll be able to make mortgage repayments.
So don’t make any big changes before applying for a mortgage. Changing from a salary to being self-employed, taking out a new car loan, or switching jobs could hurt your chances.
10. Make savings clear
Lenders love to see savings, so if you’re putting aside a certain amount every month, or investing regularly - make this clear in your application so your lender doesn’t confuse those transactions with something else.
11. Save more than your mortgage
One of the best ways to prove you can afford a mortgage is to simply make sure your current rent payments plus savings are more than your mortgage repayments would be. Making this amount 20% higher than your mortgage repayments is a good place to start.
12. Make an effort for three months
Your lender will look at the last three months of your bank transactions to understand your expenses and income. For those three months, be on your best behaviour - reduce your spending, increase your saving, and avoid missing payments or going into unarranged overdraft.
Asking for for less could increase your chances of approval.
13. Get pre-approval before you start shopping
Before you look at a single home, it’s a good idea to have pre-approval in place. This is essentially an indication from your lender that they’ll lend you a certain amount if nothing else changes and they approve of the property you buy. It’ll give you confidence that you can afford the properties you’re considering and real estate agents may take you more seriously.
14. Sort out your documentation
It’s a good idea to get all your documents together before you make a home loan application. This may include:
Photo ID.
Three months of bank statements.
Your most recent pay slip.
Your employment contract and/or a letter from your employee confirming your salary, occupation and employment status.
Letters from the relevant agencies if you’re receiving any benefits.
Gifting certificates signed and witnessed by a solicitor if you’ve been gifted all or part of a deposit.
A letter from your KiwiSaver provider confirming what can be withdrawn for the purchase (if applicable).
Need a hand getting this stuff together? Your mortgage broker can let you know what you need and help you prepare everything.
15. Get a little help
Getting a mortgage in NZ can be tricky but you’re not alone and there’s help available. If you’re eligible you may be able to withdraw from your KiwiSaver to fund your deposit, or get a Kainga Ora-backed First Home Loan with just a 5% deposit if your income allows.
Read more about help available for first home buyers here.
DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an advice service. The article is only intended to provide general information about getting a mortgage in New Zealand. Nothing in this article constitutes a recommendation that any service or financial product is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making decisions, we highly recommend you seek professional advice.
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