Home loan mortgage affordability

Find out what you can afford

Find your borrowing power

How much can you borrow? Get an idea with the tips below so you can go house hunting with greater certainty on what you can afford.

Getting an idea of your price range before you start the house hunt will save you time and heartache. This guide covers a few methods of working out the size of home loan you can afford, but we also suggest you start by using the Tella home loan affordability calculator. We've added a link to this below.

Other quick rules of thumb around affordability are:

Multiple of income

Take your total income and multiply it by 6 as an indication of how much you can borrow. For instance, if you have a total joint income of $200,000, you could potentially borrow $1,200,000. Your monthly expenses such as any personal loans or higher than normal living costs will reduce this amount.

Payments as a percentage of income

Fixed payments such as total monthly mortgage repayments plus any other loan or hire purchase payments, should be no more than 40% of total monthly gross income. You can work backwards from totalling up your salary and then totalling up your existing fixed payments to determine the maximum mortgage repayment a lender will accept. Then you may try out different loan sizes to see what you can afford with these repayments.

What’s left over

This is the most common assessment used by lenders. They consider a minimum amount, referred to as minimum surplus or uncommitted monthly income, that should be left over each month after fixed payments and a living allowance are deducted. The acceptable amount varies from bank to bank. The estimates for a couple are based on their joint income and lenders expect to see a smaller surplus from someone with children.

Loan to value

All New Zealand banks are governed by the Reserve Bank, and they specify that each bank holds no more than 10% of their loans with a loan-to-value ratio greater than 80%. This means that, even if you could afford to borrow more than 80% LVR, you’re not guaranteed a loan approval as it depends on how many other loans held by that bank are above 80% LVR.

Find out what you can afford

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