How much can you borrow?
The amount you can borrow depends on
• the value of the home you want to buy
• how much equity or deposit you have to contribute
• how much you can afford to pay towards your loan.
These things all need to balance, so if you can afford a bigger loan you may need less equity or deposit.
How much is the home worth?
How much you can borrow is based on the market value of the home. Every lender has different lending guidelines but most will let you borrow up to
• 80% of the home’s market value (or the price you pay, whichever is less) depending on your situation. In some cases you may be able to borrow more.
• 70% for a purpose built apartment, or up to 65% for a converted apartment
• 40–70% of the land’s market value for a section depending on the area and services such as water and power.
What equity or deposit do you need?
Generally you need to have put in at least 10-20% of the money yourself before you can get a home loan – this is your deposit. It depends on the value and location of the home and your financial situation. This money could come from either equity you already have in a home, from a deposit you have saved, or from being in KiwiSaver.
The word deposit is also used to mean the money you pay the real estate agent as the down payment on your home.
What about KiwiSaver?
If you have been saving with KiwiSaver for at least 3 years you may be able to take out some or all of your contributions (plus your employer’s contributions) to help you buy your first home. After 3 years of saving you might also get a Housing New Zealand first home subsidy of up to $5,000 depending on how long you’ve been saving. If you qualify you’ll get $1,000 a year for up to 5 years’ saving. Couples who both qualify could up this amount to $10,000 between them. To qualify there are certain income and home price levels.
What if you already have a home?
If you already own a home and want to sell it to buy a new one, you can usually use the equity in your current home as the deposit for your new one. Equity is the portion you own yourself after your home loan is paid off.
Or you may be able to keep your current home as an investment and use some of the equity you have in it to buy another home. If you’d like to find out more about investing in property and whether your home might be a suitable rental home.
What loan can you afford?
There’s no easy way to work out what you can afford – because everyone’s situation is different. You might like to start by doing a simple budget so you know what your current situation is and how much you might be able to afford to spend on a home loan. There’s a budget worksheet in the tool kit at the back that you might find useful.
Most lenders say your total loan payments (for all debts) can’t be more than about a third of your income before tax. But they also take your other expenses into account and want to know that you have spare income left over for unexpected expenses – and so you can still have a life after buying your home.
Here’s a quick guide…
|
If your annual household income before tax is… |
You may be able to borrow… |
|
$50,000 |
$186,200 |
|
$60,000 |
$235,000 |
|
$70,000 |
$287,000 |
|
$80,000 |
$335,700 |
|
$90,000 |
$384,400 |
|
$100,000 |
$433,000 |
|
$120,000 |
$533,600 |
|
$150,000 |
$595,100 |