Buying guide

How much can I borrow for a mortgage?

Before looking for a home, you should calculate how much you can borrow and afford for a mortgage.

26 April 2023

When you’ve decided it’s time to buy a home, you’ll have a couple of key questions. How much can I borrow for a mortgage? And what kind of mortgage can I afford? You can then start looking with a certain price range in mind and be a confident buyer.

What you’ll learn:

  • How much can I borrow for a mortgage?
  • How much mortgage can I afford?
  • How can I borrow as much as possible?
  • Will pre-approval on a home loan tell me exactly what I can borrow?
  • How can my credit rating affect my ability to borrow for a mortgage?

How much can I borrow for a mortgage?

As a “back of the envelope” calculation, if you take your gross salary or income and multiply it by five, that’ll give you a decent idea of how much you can borrow to buy a home with a 20% deposit.

To get a better idea, there’s a good selection of borrowing calculators out there, so go to a trusted source and put in the requested numbers.

You’ll typically have to know things like:

  • Estimated fortnightly or monthly repayments (this could be the rent you’re paying at the moment)
  • Monthly expenses
  • Total annual gross income (before tax) or if self-employed net profit before tax
  • The interest you’ll be paying on the loan (7% for instance)
  • The duration of the loan (generally lenders for home loans allow up to 30 years)
  • The number of dependents you have

Remember, a borrowing calculator is a guide. Every lender will have their own policies and criteria for deciding how much they’re happy to lend you.

How much of a mortgage can I afford?

If you’re wondering what monthly repayments on your mortgage you could handle as a homeowner, the mortgage industry generally estimates that they range from 28% to up to 40% of your gross income. If it’s at the upper end, between 35% and 40%, you should include payments on any other debt like credit card and car payments, and savings contributions within those calculations.

The amount you have for your deposit will also affect how much lenders will feel comfortable lending to you. In the current market, you’ll be expected to have a 20% deposit, usually with the help of your KiwiSaver, any first home grants and help from family. This means you’ll be borrowing 80% of the value of the house.

If you have a 20% deposit, you’ll have a good choice among lenders, you’ll get their best rates, cash contribution and avoid low equity fees. If you’re buying a newly built home, you’ll need a 10% deposit.

How can I borrow as much as possible?

You don’t have to (and many argue you shouldn’t) borrow up to your highest limits, as anyone who’s living through this rising interest rates environment will tell you. A number of lenders will want to see that you have a minimum amount of uncommitted monthly income (UMI) left each month. This is spare income that can cover unexpected costs caused by an interest rate rise or a reduction in income, for example.

If you want reassurance on how much you can borrow, you can choose to work with a mortgage broker who will conduct a more nuanced interpretation of your income, expenses and then approach the lenders they think will best suit your case. The amount a bank lends you will differ from bank to bank depending on your individual circumstances.

Lenders will be looking at income and employment stability, favouring those on regular incomes and, less so, self-employed people. They’re not only looking at what you earn but at your ability to get a new job if things go pear-shaped. They also want to see that you’re a good saver and understand where your money is going.

Regular income earners are treated differently to those that are self employed

If you get a bonus regularly from your employer, the way banks and non-banks assess that when deciding how much to lend can vary in the thousands of dollars. If you’re self- employed, the size mortgage you’re given can vary by over $100,000.

So, to find out how much of a mortgage you can afford, you’ll want to explore all the options thoroughly and make sure you’re talking to the lenders who understand you and your situation best.

Will pre-approval on a home loan tell me exactly what I can borrow?

Getting pre-approval on a home loan can give you a firm idea of how much you can borrow, it’s a good framework, but the bank still has to see the house you have in mind before you’ll get the final figure they’re happy to advance.

Before agreeing to the loan, the bank will look at the value, location and type of property you want to buy.

Banks are more cautious about lending on:

  • lifestyle/rural blocks
  • apartments with leasehold issues and potential oversupply
  • plaster homes built in the 1990s and 2000s with a reputation for leaking
  • properties that have had unconsented work done

How can my credit rating affect my ability to borrow for a mortgage?

Lenders will always check your credit history when you apply for a mortgage. You can check your own credit rating on

  • Equifax
  • Illion
  • Centrix

If you’ve missed a hire purchase payment or have an unpaid power bill on your name, this will be on your credit history. And any default payment can stay on your credit record for five years even after you’ve paid the amount in full.

Credit scores are between 0 and 1000 and if you have a score of between 300 to 500, most lenders will view you as a risk and may not approve your application or they’ll lend you less. If your score is between 500 and 700, you’ll be considered an average loan applicant, while if it’s over 700 you’ll be well perceived by mortgage lenders.

There are non-bank lenders who work regularly with higher risk borrowers, people who have a black mark in their credit history. You’ll typically have to approach them through a mortgage adviser and can expect to pay a higher interest rate for a period.

Article reviewed by mortgage expert Karina Reardon from

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide. Of course, it doesn’t consider your individual needs or situation. If you're thinking about buying or selling a property, you should always get specific advice.


Gill South
Gill South