Understand what shapes your borrowing power

What lenders actually look at

Lenders start with your income, but only the part they consider reliable. Steady salary or wages usually count in full, while overtime, bonuses and commission normally need a history behind them before they count. If you are self-employed, expect to show one to two years of accounts.

Then they subtract what you already owe. Personal loans, car finance and buy-now-pay-later all reduce your room, and student loan repayments come straight out of your pay. Credit cards are counted on the limit, not the balance, so a card you clear every month still counts against you.

Finally they look at your living costs, any dependants, and the deposit or equity you bring. Together those decide how much of a repayment your household can realistically carry.

Why your spending matters more than your salary

Under New Zealand's responsible-lending rules, a lender has to check that repayments would not put you under strain. That means working from your real living expenses rather than an optimistic estimate, usually by reviewing your recent bank statements.

The higher your everyday spending, the less room there is for a mortgage repayment, and a smaller loan is the result. Unused credit card limits work the same way — the lender assumes you could draw the full limit tomorrow, even if you never carry a balance.

It is why two people on the same salary can be offered very different amounts, and why tidying up spending and limits often moves the number more than a pay rise would.

What serviceability means

Serviceability is simply the lender's test of whether you could comfortably afford the repayments. They take your reliable income, subtract tax, existing commitments and living costs, and check the repayments fit inside what is left with room to spare.

The important part is that they do not test at the rate you would actually pay. They test at a buffer above current rates, so you would still cope if rates rose. That is why borrowing power does not automatically jump the moment rates come down.

Why two people on the same income borrow different amounts

Dependants, existing debts, credit card limits, employment type, living costs and other commitments all shift the result. Income is only the starting point.

For example, picture two households earning the same amount: one with no dependants, no consumer debt and modest spending, the other with children, a car loan and a large unused card limit. The first will be assessed as having far more room for repayments. That comparison is illustrative only — your result depends on your own numbers.

What the number is not

The figure you get here is an estimate, not an offer. Nothing has been verified and no lender has seen it.

A bank pre-approval is a step further: a conditional indication of what a lender would be willing to lend, usually valid for a limited time and subject to conditions. A formal approval only happens once a lender has verified your income, identity and deposit and assessed the actual property.

The final decision always sits with a lender, never with a calculator.

How your deposit is assessed

Genuine savings, a KiwiSaver first-home withdrawal and gifted family funds can all form part of a deposit. Lenders will want to see where the money came from, and whether a family contribution is a gift or a loan.

LVR — loan-to-value ratio — is simply the size of the loan compared with the value of the property. A bigger deposit means a lower LVR, which lenders view as lower risk.

Buying with less than a 20% deposit generally sits in low-deposit lending. It is common, but it usually brings extra conditions, fewer available lenders and sometimes a different rate or an added fee. These rules change over time, so a lender or licensed adviser can confirm the current settings.

Should you use a mortgage adviser?

An adviser compares your situation across a panel of lenders rather than one bank's policy, structures the loan and manages the application, and is usually paid by the lender rather than by you.

They tend to add the most value for low deposit buying, Kāinga Ora eligibility, self employed income or a previous decline. A straightforward application with a competitive bank offer often doesn't need one.