Understanding your NZ mortgage

With a pre-approval you haven’t borrowed any money or bought anything yet – it’s just the bank saying they’re happy to lend to you under a few conditions – often this is a valuation on the house you’re thinking of buying. A pre-approval is a great way of getting ready to snap up the right house when you find it – you’ll know how much you can borrow and be in a better position to negotiate. Get pre-approved for your mortgage now.

Pre-approval is valid for 3 months, but if you haven't bought in that time we can usually extend it for you.

Quite a bit, but we try and reduce it for you. First you have to fill out a form with all your assets, debts, income and expenses. You’ll need to prove your income, that you have a deposit saved and three months of bank statements. The bank and your Squirrel mortgage adviser might also run credit checks.

Yes, they absolutely do—not quite as closely as they did a few years back under restrictive CCCFA rules, but lenders review your bank statements to understand your spending habits. Subscriptions, discretionary spending and existing debt are looked at closely. Tidying things up before you apply can improve your chances.

It can do. Lenders will look at your credit score as part of their risk assessment when considering your application. Missed payments, defaults or excessive credit checks can impact your chances of getting an approval, but a lower score doesn’t always mean an automatic “no”. 

You can check your credit score via ClearScore. 

Short answer: probably. Lending criteria is different from bank to bank so we’ll help you shop around for the best deal. If you go direct to your bank you’ll have less chance of securing the right loan (or any at all) because they can only give you one solution. Squirrel think outside the square and we've even developed our own lending products for those of you who don't quite fit inside the bank's box.

Unfortunately not—it got the axe in mid-2024—but there are other options out there for first home buyers who haven’t quite managed to get a 20% deposit together, or who otherwise need support. 

These include Kāinga Ora’s First Home Loan scheme and tapping into your KiwiSaver to help with your deposit. Some developers also now offer their own first home grants, providing a cash contribution to support people getting onto the property ladder. 

If you're a first home buyer - absolutely! These days, many people tap into their KiwiSaver balance as part of their deposit. It's one of the best tools available for getting into your first home. To be eligible, you'll need to have been contributing to KiwiSaver for more than three years, and you'll need to make sure you leave at least $1,000 in your account. 

Learn more about KiwiSaver first-home withdrawal here.

We might be a little biased… but working with a broker usually means you’ll have more choice, and a better chance of finding the lender that really works for you. 

Going straight to your bank limits you to their rules, while a broker will compare multiple lenders, provide advice on your loan structure and negotiate with lenders on your behalf – often at no cost to you. It can save you time, stress, and money, especially if your situation isn’t perfectly straightforward.

Yes, if you have good income and spending habits. We can generally get you 90% and even 95% in some cases. Borrowing over 80% also costs more so to avoid that, we often suggest using the bank of mum and dad.

While 20% is the golden number, the banks are able to do a certain proportion of their lending to low-deposit borrowers—typically first-home buyers. 

It’s worth noting that if you’re working with a smaller deposit, you may have fewer lenders to choose from, and you’ll typically pay a premium on interest rates for as long as your LVR remains over 80%, but it can still be very achievable. We’ve written a free guide on buying with a low deposit – get the guide.

LVR (or loan-to-value ratios) are another set of lending restrictions managed by the RBNZ which dictate the maximum you can borrow on your mortgage as a proportion of the value of your home. 

For owner-occupiers, LVRs are generally set at 80% for existing properties (which is where the 20% deposit rule comes from) and 90% for new builds. So, if you’re buying an existing home for $800,000 you’ll need a deposit of at least $160,000 (borrowing a maximum of $640,000) in order to get the best rates and deals.

For property investors, LVRs are set at 70% for existing homes and 20% for new builds. 

The banks are able to do a small proportion of their lending to borrowers over those LVR limits—but generally the lower the LVR, the more lender options and sharper rates you’ll have access to. Learn more about LVRs here.

If you’re self employed or a contractor there are a few more hoops you’ll have to jump through. To borrow over 70%, you need to have been doing what you do for more than two years and have a record of your earnings. In some cases one year of financials (plus a forecast) may work. If you have low expenses and work in an industry that regularly uses contractors, like project management, IT or film, the bank will be more flexible, but will still usually need a 15%-20% deposit.

Lenders focus on profitability, not just turnover. If the business is making a loss, banks will factor that into your affordability calculations, which can reduce how much you can borrow. 

Teaming up with friends or family (a.k.a. going down the co-ownership route) can be a great way to get onto the property ladder sooner, and lighten the financial load of homeownership—but you’ll want to make sure you’ve got a good understanding of the potential risks and challenges, and agreement on they’ll be handled if they crop up.  

It’s important to seek your own independent legal advice as part of the process, and get a lawyer to write up a property sharing or co-ownership agreement which clearly defines who owns what, and what happens should circumstances change (such as if one party wants to sell, move out, or can no longer afford their mortgage). 

Different banks have very different policies around co-ownership scenarios, depending on who you’re buying with. Some lenders are better suited to friends buying together, while others are more tailored to families—and a mortgage broker can help you make sense of which bank might be right to you. 

For more information on the process of buying with friends or family, have a read of this article. 

If you have less than a 20% deposit your family can guarantee the difference. This is limited to a maximum of 20% so Mum and Dad won’t risk losing everything if you fall over.

DTIs (or debt-to-income ratios) are lending restrictions set and managed by the Reserve Bank, that dictate the maximum you can borrow to buy a house based on a multiple of your household income. 

They’re designed to help ensure affordability, keep our housing market stable and reduce the risk of borrowers going into financial stress if and when interest rates increase. DTIs are currently capped at 6x household income for owner-occupiers, and 7x household income for property investors. Learn more here.

If you are building a new house you’ll find most lenders will only go up to 80%, but we can often sort you out with up to 90%. With a new build you should get a fixed price contract with a master or certified builder so their work will be guaranteed. Before the mortgage is fully approved you will need to get a registered valuation. Then along with the builder and the lender, we’ll work out when progress payments will be made during the build. At each stage the bank may ask for an updated “as is” valuation. This is them checking that you haven’t blown the budget – you’ll need to stay below the lender’s loan-to-value cap (generally 80%) throughout the build. Most banks lend against the project cost. Sovereign is a bit different and lets us use an acquisition price that makes allowance for “reserves” and interest capitalisation. This makes them a good choice for these types of mortgages.

A conditional offer is basically what it sounds like — one that’s dependent on certain conditions being met first, like getting finance approval, acceptable building or LIM reports. An offer becomes unconditional (and legally binding) once all conditions have been met. 

There can be lots of potential benefits to splitting your loan—i.e. fixing different portions for different terms—including helping to spread risk in case interest rates rise, meaning you don’t have your entire loan balance rolling off at once. 

Whether it’s right for you, though, depends on how stable your income is and how hands-on you want to be with your mortgage. Your Squirrel adviser can talk you through whether it’s right for you. 

A revolving credit loan works a bit like a big overdraft attached to your mortgage. Your income goes directly into the account, and you only pay interest on the remaining balance owed. Revolving credit facilities are flexible, meaning you can withdraw funds if needed – but it does require discipline, so you’re not dipping into those funds unless you really have to. 

Vendor finance is where the seller leaves equity in the property (as a second mortgage.) It is a loan that you’ll have to pay back. Ideally the vendor finance is charged at a market interest rate. Vendor finance is trickier and only really works for people with no deposit but high incomes and no other debts.

There isn’t a one-size-fits-all answer to this—the best lender is the one that’s right for you and your situation.

That’ll come down to things like your income, deposit, property, and goals. Different banks compete in different areas, so shopping around instead of defaulting to your current bank can make a real difference. 

Squirrel works with all the major banks, meaning our advisers can help match you with the right one for your situation. Book a chat with an adviser. 

If you’re confident negotiating and know the market well, you might be able to secure a competitive deal yourself (it never hurts to ask for a discount). For most people, though, a mortgage adviser helps you get the best outcome by knowing which lenders are competitive and how to negotiate effectively.

If you’re a non-resident you’ll only be able to borrow 70% of the property value. If you work in NZ but don’t have permanent residency your maximum borrowing will be 80%.

Beyond your deposit, you’ll also need to budget for legal fees, valuations, building and LIM reports, insurance, rates and moving costs. These can add up quickly, so make sure you’re factoring these into the equation to help avoid any nasty surprises. 

There are two key things to bear in mind when it comes to the best time to refinance. 

If you received a cashback when you took out your current loan, that money will be subject to a clawback period of either three or four years (depending on your bank). Should you choose to refinance before your clawback period is up, you'll need to repay some, or all, of your cashback amount. That said, in some cases, it may make sense to incur a partial clawback if it means being able to refinance at a lower rate. 

The other thing to consider is any fixed-term loans you may have in place, and how close they are to maturity. Most people wait to refinance after their fixed rate has expired - although you can refinance earlier, but break fees may apply. Whether it's worth taking the hit will depend on your rate, loan size and what you're trying to achieve. 

A quick chat with a mortgage broker can help you crunch the numbers and work out what's best for your situation. You can learn more about refinancing here. 

Yes—you can, but bear in mind it’ll mean either having to juggle two mortgages at once, or sorting out bridging finance as an interim solution until you’ve sold your existing property. 

Either approach can be complex and costly, and tricky to get across the line with the bank depending on your level of equity and cashflow. 

Depending on the state of the market, it’s often better to sell first with a long settlement date if needed (or be prepared to rent short-term). An expert mortgage broker can help you understand the right move for you. 

KiwiSaver is designed to help first home buyers onto the property ladder, meaning it’s a hard no for investment properties, and usually for second homes as well — with one exception. 

If you previously owned a home but no longer do (for example, after a divorce), and you’re effectively back in the first-home buyer position, you may be eligible for what’s known as a “second chance withdrawal”. 

To get a second chance withdrawal across the line, you’ll need to get a letter from Kāinga Ora confirming your eligibility, and then approval from your KiwiSaver provider. 

There are plenty of small changes you can make that, when combined, can help to shave years off your mortgage, and thousands off your total interest payments. 

Making extra repayments; refinancing and using cashback payments to knock a lump-sum off your loan, using revolving credit or offset accounts (as long as you’ve got good financial discipline) and reviewing your mortgage structure regularly can make a big difference. 

Learn more about how to get mortgage-free faster. 

Lots of people aim to be mortgage-free by retirement, but there’s no “right” age. It all comes down to your wider financial goals, investments and lifestyle. The key is having a plan that works for you. 

Learn more about how to get mortgage-free faster.