How much can I borrow?
December 03, 2018 at 4:53 PM
AUCKLAND, New Zealand: How much you can borrow is determined by two factors:
- How much you can afford to pay
- The property type and it’s valuation
To help you work out what a bank will lend, LoanPlan work with you to establish your household budget, including income, estimated mortgage payments, utility bills, credit card outgoings etc.
From this information we can calculate what percentage of your gross income would be required to cover your outgoings. As a rule of thumb, banks prefer to limit these outgoings to 30-40% of gross income, to ensure there is a minimum surplus left over for unexpected bills or interest rate increases. High LVR loans will generally require a larger buffer of spare income.
Some banks may include any income from flatmates into this calculation, others will not.
As your mortgage broker, we can advise you on which lending providers will best match your situation, as banks vary in their methods for assessing income.
The type of property you intend to buy will have a significant bearing on how much the bank is willing to lend. Banks may lend up to 80% of the value of urban residential houses. For apartments and rural properties, this percentage may be lower. Your bank will most likely request a valuation on the property and if this comes in lower than the sale price, the bank will calculate their lending based on this lower value.
For low-equity loans (less than 20% deposit), you’ll need to demonstrate a good savings history—a deposit ‘gift’ from parents may not satisfy the bank’s requirements. However, any KiwiSaver funds you have may qualify as savings towards your deposit, as long as you have been contributing for at least three years. You may also be eligible for government assistance through their Welcome Home Loan scheme if you are a first home buyer.