Quick Answer: New Zealand banks typically lend 5-6 times your annual household income, assuming modest expenses and debts. With a $130,000 combined income, you could borrow $650,000-$780,000. Your actual borrowing power depends on your deposit size (10-20%), existing debts, living expenses, and credit history. Always budget below your maximum to allow for rate increases and unexpected costs.Buying your first home is a huge milestone. But before you start browsing listings or heading to open homes, the most important question to answer is: how much can you actually afford?
Your borrowing power is influenced by more than just your income. It also depends on your deposit, debts, spending habits, and the type of property you're looking to buy. At Luminate Financial Group, we help first-home buyers across Auckland, Wellington, Christchurch, and throughout New Zealand understand what they can realistically afford and how to plan a smart budget that supports long-term success, not just loan approval.
This guide will help you get clear on what lenders look at, how to build your home-buying budget, and what hidden costs to prepare for when buying your first property in New Zealand.
When a New Zealand lender reviews your first home loan application, they assess much more than just your salary. Understanding these factors helps you prepare a stronger application and get accurate borrowing estimates.
Lenders evaluate all sources of household income:
Income must be provable through payslips, tax returns, employment contracts, or bank statements showing consistent deposits.
Banks examine both fixed costs and discretionary spending:
Many first-home buyers underestimate how closely banks scrutinize spending patterns. Frequent overdrafts, bounced payments, or high discretionary spending can reduce your borrowing power significantly.
Every debt counts, even if you're not using it:
A $10,000 credit card limit could reduce your borrowing power by $50,000-$60,000, even if the card has a zero balance. Paying down or closing unused credit before applying can substantially increase what you can borrow.
Your deposit affects both approval likelihood and loan terms:
Acceptable deposit sources include:
Lenders review your credit file and recent bank statements:
Clean credit history and tidy banking habits can be the difference between approval and decline for borderline applications.
Most first-home buyers in New Zealand choose 25-30 year terms:
Shorter terms mean higher repayments but you'll pay dramatically less interest over the life of your loan.
All New Zealand lenders apply stress tests to ensure you could afford repayments if interest rates rise. Banks typically test your ability to service the loan at:
This protects both you and the lender from financial stress if rates increase unexpectedly.
Your deposit is one of the most critical factors in your home loan application. Here's what you need to know about deposit sizes and their impact.
A 20% deposit is considered the gold standard in New Zealand because:
Example: $700,000 property = $140,000 deposit needed
Buying with 10-15% deposit is possible but comes with trade-offs:
Example: $700,000 property = $70,000 deposit (10%) or $105,000 (15%)
You'll also need cash reserves beyond your deposit to cover:
Through Kāinga Ora's First Home Loan programme, eligible buyers can purchase with just 5% deposit:
Example: $700,000 property = $35,000 deposit (if within price caps)
Maximize your deposit using:
Every lender has different criteria, but as a general rule, New Zealand banks will lend approximately 5-6 times your annual household income, assuming modest expenses and debts.
Income: $80,000 per year
Income: $100,000 per year
Combined income: $130,000 per year
Combined income: $160,000 per year
These can significantly decrease what banks will lend:
Increase what you can borrow by:
The best way to get an accurate borrowing estimate is to work with a mortgage adviser who can assess your position across multiple New Zealand lenders and find the best fit.
The purchase price and deposit aren't the only costs to budget for. First-home buyers in New Zealand should prepare for these additional expenses.
Legal Fees: $1,500-$2,500 Your lawyer handles the property transfer, title checks, and settlement process.
LIM Report: $300-$400 Land Information Memorandum from the local council showing consents, rates, and property history.
Builder's Report: $500-$800 Professional inspection identifying structural issues, weathertightness, and maintenance requirements. Essential for older homes.
Registered Valuation: $700-$1,000 Sometimes required by lenders, especially for rural properties or unusual homes.
Insurance Premium: $1,200-$2,500/year House and contents insurance must be in place before settlement. Lenders require proof.
Moving Costs: $500-$2,000 Truck hire, professional movers, cleaning, and general relocation expenses.
Rates: $2,000-$4,000/year Payable to your local council from the day you take ownership. Varies by location and property value.
Insurance: $1,200-$2,500/year Annual premiums for house and contents cover.
Maintenance: $2,000-$5,000/year Budget 1-2% of property value annually for repairs and upkeep.
Utilities Setup Power connection, internet installation, water charges (if applicable).
KiwiSaver funds can only be used for the deposit or settlement costs, not for legal fees, building reports, or moving expenses. You need separate cash savings for these costs.
Recommended buffer: Have $5,000-$8,000 in cash savings beyond your deposit for all the extra costs.
Once you know your purchase range, calculate what your actual home ownership costs will be each week.
Loan amount: $600,000
Interest rate: 6.5% per annum
Loan term: 30 years
Weekly repayment: Approximately $870
Add ongoing costs:
Ask yourself these critical questions:
Could I afford this if interest rates increased by 2%? At 8.5% interest, the same $600,000 loan would cost $1,065/week (principal and interest only). Total weekly cost would be $1,215.
Would I still be able to save or handle unexpected costs? Budget for car repairs, medical expenses, appliance replacements, and other surprises.
What happens if my income drops temporarily? Job loss, parental leave, illness, or reduced hours can impact your ability to pay.
Can I maintain this lifestyle long-term? Will you want to travel, have children, change careers, or reduce work hours in the next 5-10 years?
If you're currently:
This suggests you could sustainably afford around $950/week in total home ownership costs, leaving some buffer for rate increases.
Traditional advice suggests spending no more than 30% of your gross income on housing costs. However, in expensive New Zealand housing markets, this may not be realistic.
$130,000 household income = $2,500/week gross
30% = $750/week maximum housing cost
This might be unrealistic in Auckland or Wellington. Instead, focus on:
Just because a bank will lend you $750,000 doesn't mean you should borrow the full amount. Buying at your maximum borrowing limit can create financial stress.
Interest rate vulnerability: If rates rise 1-2%, your repayments could increase $100-$200/week.
No financial buffer: Unexpected costs (car repairs, medical bills, job loss) become crises.
Lifestyle constraints: No money for holidays, entertainment, or personal goals.
Relationship stress: Financial pressure is a leading cause of relationship breakdowns.
Limited mobility: Can't easily sell or move if circumstances change.
Financial breathing room: Ability to save, invest, and enjoy life while paying your mortgage.
Rate rise protection: Cushion against future interest rate increases.
Faster debt reduction: Extra money allows additional repayments, saving thousands in interest.
Life flexibility: Room for career changes, parental leave, or reduced work hours.
Stress reduction: Peace of mind knowing you can comfortably afford repayments.
Many experienced mortgage advisers recommend borrowing 10-20% below your maximum approved amount. This provides:
Example: Approved for $750,000 → Consider borrowing $650,000-$675,000
Borrowing power goes much further in some regions than others.
Median house price: $1,050,000+
Income needed (20% deposit): $160,000-$180,000 household
Reality: Many first-home buyers start with apartments or townhouses
Median house price: $850,000-$900,000
Income needed (20% deposit): $135,000-$150,000 household
Reality: Mix of apartments and smaller homes in outer suburbs
Median house price: $650,000-$700,000
Income needed (20% deposit): $100,000-$115,000 household
Reality: More accessible for first-home buyers
Median house price: $600,000-$750,000
Income needed (20% deposit): $95,000-$125,000 household
Reality: Growing markets with better affordability than main centers
Median house price: $400,000-$550,000
Income needed (20% deposit): $65,000-$90,000 household
Reality: Most affordable but fewer employment opportunities
Multiply your gross annual household income by 5-6, then subtract any significant debts. This gives a rough estimate. For accuracy, use a mortgage calculator or speak with a mortgage adviser who can assess your specific situation across multiple lenders.
Yes, a larger deposit increases borrowing power in two ways: you need to borrow less for the same property, and banks view you as lower risk, potentially offering better rates and more favorable terms.
This depends entirely on location and property prices. In provincial towns, household income of $70,000-$80,000 may be sufficient. In Auckland, you typically need $140,000+ household income for entry-level properties.
You can withdraw all KiwiSaver contributions except the mandatory $1,000 minimum. However, consider keeping extra in KiwiSaver if you're close to qualifying for higher HomeStart Grant tiers or if you'll need the funds for retirement soon.
Aim to keep 3-6 months of expenses in emergency savings after purchase. This covers unexpected repairs, job loss, or other financial surprises without needing to borrow or sell.
Yes, de facto relationships are treated the same as marriages for lending purposes. Both incomes and both debts are assessed. Some lenders may require a longer relationship period (6-12 months) to include both incomes.
Self-employed applicants need 2+ years of financial statements (usually tax returns and GST returns). Banks typically assess your income conservatively, often at 80% of declared income, and may require a larger deposit (15-20%).
Yes, many banks offer renovation lending as part of your home loan. The property must already meet minimum lending standards, and you'll need detailed quotes and plans. This is typically cheaper than separate personal loans for renovations.
Your first home should be a financial stepping stone, not a burden. Understanding how much you can afford gives you the power to make smart decisions, stay in control of your finances, and enjoy the journey into home ownership.
The gap between "maximum approved amount" and "comfortable sustainable amount" can be significant. Prioritize long-term financial health over short-term property aspirations. Buying a modest first home you can easily afford often leads to better outcomes than stretching for a dream home that creates financial stress.
At Luminate Financial Group, we work with first-home buyers across New Zealand to calculate borrowing power, compare lenders, and structure loans that fit your lifestyle—not just your bank's formula. We help you understand the real numbers and make decisions that support your financial wellbeing for years to come.
Ready to know exactly what you can afford?
Book a free First-Home Budget Session with Luminate. We'll show you your borrowing range across multiple lenders, review your deposit and goals, and help you prepare for every part of the journey—from application to settlement.
📞 Call 0800 333 400
📧 Email askus@luminate.co.nz
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Luminate Financial Group - helping first-home buyers in Auckland, Wellington, Christchurch, and throughout New Zealand since 1998.