The Ultimate Guide to Getting a Mortgage in NZ (2025)

How Mortgages Work in New Zealand

Let’s be real, getting a mortgage in New Zealand feels more complex than ever. With interest rates moving, LVR rules changing, and every bank doing things slightly differently, it’s easy to feel overwhelmed.

Whether you’re a first-home buyer, an investor, or looking to upgrade, understanding how mortgages work in 2025 is essential if you want to avoid delays, get the best deal, and feel confident throughout the process.

This guide will walk you through everything — from the mortgage process and what banks are actually looking for, to insider tips for boosting your borrowing power and saving thousands in interest. No jargon. No fluff. Just what you need to know to get approved and into your next home.

Let’s break it all down. Below, you’ll find a step-by-step walkthrough, key bank criteria, and proven strategies to maximise your lending potential. Let’s dive in.

 

Step-by-step process: from pre-approval to settlement

Getting a mortgage is reasonably a straightforward process, however, there are quite a few steps involved and it’s certainly not a process that most people go through too often. Below is a guide on the specific steps and a rough timeline you can expect each step to take.

 

1. Talk to a mortgage broker (30-minute meeting + 1 hour of document gathering)

There are three areas where a bank can decline your mortgage application – income, debt, and deposit. Mortgage brokers are generally free to work with and it’s good to know your financial situation at the moment and come up with an action plan to get yourself in a position to purchase a home.

You can contact us here for mortgage broker recommendations.

You can also use our mortgage calculator to get an idea on how much you can afford to spend on a house.

 

2. Get a Pre-Approval (up to 2 weeks)

Pre-approval from a bank or lender will give you a more definite idea of how much you can borrow. This is typically a conditional approval that confirms you are eligible for a mortgage up to a certain amount, though it is not a guarantee.

Banks will give you conditional pre-approval as they would like to take a look at the property you are purchasing before giving you an unconditional pre-approval. This is because they will be owning a percentage of your home (until you pay off your mortgage) and want to make sure the property is structurally sound and insurable so they reduce their risk of losing their investment.

Later in this article, I’ll discuss how you can get your pre-approval to go from conditional to unconditional which will make your offer more attractive to sellers.

3. Start putting offers on properties! (As long as you need)

Firstly, I need to get out of the way that I mentioned as long as you need in the above heading but I want to point out that pre-approvals tend to last for 90 days. After this, getting another 90-day extension is reasonably easy. However, after that, your mortgage broker will need to do another application to the bank for another pre-approval.

Now that you’ve got a pre-approval from the bank, it’s time to start putting some offers on houses. Your mortgage broker will have given you the amount you’re pre-approved to borrow from the bank. The total lending amount plus your deposit is the maximum you should offer for a property.

Please talk to a lawyer or your mortgage broker first but some key things to put on your offer are:

• • Subject to finance – Ensures the bank will lend you the money for this specific property. Your pre-approval is likely conditional.

• • Subject to a building inspection – Ensures the home is structurally sound and doesn’t have any major issues

• • Subject to a LIM (Land Information Memorandum) report – Ensures there is no unconsented building work done and provides information about zoning/flood areas.

 

4. Pre-Settlement Inspection (1 Hour)

Once you have an offer approved and you’ve gone unconditional, you’ll want to do a pre-settlement inspection of your new property. This is to ensure it is in the same condition as it was when you put the offer on it.

To do this, get in contact with the real estate agent to find a mutually beneficial time. You’ll want it to be close to your settlement date but not too late so if any repairs are required, there is time for them to be completed before you take possession of the property.

Here is a list of things you’ll want to look for in your pre-settlement inspection:

 

General Condition

• • The house is clean and tidy

• • No new damage since the sale agreement was signed

• • All agreed repairs or maintenance have been completed

Fixtures and Fittings

• • Light fittings and switches are working

• • Heat pumps, fireplaces, or heaters are operational

• • The stove, oven, range hood, and dishwasher (if included) are working

• • Any built-in appliances (washing machine, dryer, etc.) are working (if included)

Plumbing

• • Taps have good water pressure and are functional

• • The toilets flush properly and are not leaking

• • The hot water system is working

• • No visible leaks under sinks or elsewhere

Electrical

• • Power is connected and outlets are working

• • All light switches function correctly

Structure and Exterior

• • No new cracks or damage to walls, ceilings, windows, or floors

• • The roof and gutters appear in the same condition as at purchase

• • Windows and doors open, close, and lock properly

• • The garage door is functioning

Grounds

• • All rubbish has been removed from the property

• • The lawns and garden are in reasonable condition

• • Outbuildings or sheds are accessible and emptied

• • Driveway, paths, and fences are in the expected condition

chattels

• • All agreed chattels are still present

 

5. Settlement

Congratulations, you now officially own a home! And the good thing about the settlement is that your lawyer will handle most of this.

Essentially on this day, the bank will release the funds for the house to your lawyer, these will then be passed to the seller’s lawyers. Once the seller’s lawyers have received the funds, the real estate agent will be able to give you the keys to your new home.

From this day forward, you are now responsible for any rates, insurance, and mortgage payments. However, if your settlement date is in the middle of a rates period, you will only be responsible for the portion of the period you actually own the property. This is something your lawyer will organise.

 

What banks look for (income, Debt, deposit)

There are three tests banks will do to see if you qualify and how much you can borrow.

These three tests are:

• • The Loan-to-Value Ratio (LVR) Test (Deposit): In New Zealand, banks typically offer up to 80% LVR (meaning you need a 20% deposit). For first-home buyers or special cases, there may be options for higher LVR.

    If you’re unsure how much deposit you need — especially if you’re a first-home buyer or using KiwiSaver — check out our full guide: How Much Deposit Do You Need to Buy a House in NZ?

• • The DTI (Debt-To-Income Ratio) Test – (Current Debt)

• • The UMI (Uncommitted Monthly Income) Test – (Cashflow): Lenders use the amount of your income, existing debts, and other factors to calculate how much you can borrow.

Each of these tests will give you a result on how much you can borrow. Your bank will then lend you the lowest amount from these three tests.

To get a rough idea of how much you can borrow from the bank, use our mortgage calculator here.

 

Common mistakes to avoid

Forgetting about the extra costs

A lot of first-time buyers focus only on the deposit, but there are a bunch of other costs to factor in. Things like lawyer’s fees, builder’s reports, LIM reports, moving costs, and insurance all add up. Make sure to budget beyond just the purchase price.

 

Borrowing the maximum just because you can

Just because the bank will lend you a certain amount doesn’t mean you should take all of it. Think about future interest rate rises, life changes, or potential maintenance costs. Giving yourself breathing room can really pay off.

 

Not thinking long-term

Some buyers focus too much on the short-term goal of just getting into a home, without thinking about how it fits into their longer-term plan. Will this property still suit you in 5 years? Is the loan structure flexible enough if your situation changes?

 

Overlooking how your mortgage will impact your lifestyle

It’s easy to get tunnel vision when house hunting, but remember: your mortgage payments will be part of your life for years. Make sure they don’t stop you from doing the things you enjoy—like travel, hobbies, or starting a family.

 

How to increase your lending potential

Remember those three tests we mentioned above that the bank will do on your finances? The amount of money you’ll be able to borrow will be the lowest result from all three tests. For example, if you’re buying an existing home to live in, you’ll generally need a 20% deposit, you can borrow (total debt including existing loans) 6x your current income and you need a certain amount of money left over each month after all of your payments have been made. This last point varies by bank and it’s best to talk to a mortgage broker about this.

Ok, with this said, let’s run an example.

Let’s assume a couple is trying to purchase an existing property to be a home to live in with the following financials:

• • Combined income: $140,000

• • Current Debt: $20,000

• • Deposit: $100,000

Here are the results of the three tests:

DTI (Can borrow 6x their annual salary): They can get a $820,000 mortgage
LVR (20% deposit required): They can get a $400,000 mortgage
UMI (Uncommitted Monthly Income (after new lending)): Will need further details.

As you can see based on the above tests, the lowest result is a $400,000 mortgage. If you include their $100,000 deposit and assume they don’t have any exceptional cash flow issues, they should be able to purchase an existing house worth around $500,000.

In this scenario, increasing their income would not allow them to borrow more, they need to increase their deposit to borrow more.

If you would like to figure out if your income or deposit is holding you back from borrowing more, use our mortgage calculator. It’ll tell you what’s holding you back from borrowing more.

With this, we can discuss strategies to improve your results in each of the three tests.

 

Tips to improve your DTI result

Ok, so this one is pretty self-explanatory. Your total debts (including the amount on your mortgage application) can only be 6x your household annual gross income for owner-occupied mortgage applications. However, for an investment property, you can borrow 7x your household annual gross income. You can read more about this on the Reserve Bank website.

In saying this, there are only two levers you can pull to score better in this test, increase your income or decrease your existing debts. If your DTI result is holding you back instead of your mortgage, consider using some of your deposit to pay down existing debts. Otherwise, you will need to increase your household income.

One thing you can do to increase your income aside from getting a pay rise is getting a boarder in your new home. Even though you don’t own the home yet, future boarder income can be counted as your household income when applying for a mortgage. However, each bank treats boarder income differently and will likely set a cap on how much income you can claim from boarders for a property. It’s best to talk to a mortgage broker to see how much you’re income will increase with a boarder.

 

tips to improve your lVR result

Again, for this test, there are only a couple of things you can do if your deposit is holding you back from borrowing more:

1. Increase your deposit
2. Buy a cheaper house

Great, that’s probably not super helpful however, one other thing to consider is buying with a Low-Equity loan. This means buying a home with less than the standard deposit (e.g. 10% instead of 20% for an owner-occupied existing property). Banks can only offer this to a certain percentage of clients but with a Kaianga Ora First Home Loan, it’s technically possible to buy your first home with as little as a 5% deposit.

Be aware, that the less deposit and the more you borrow, the more interest you’ll be paying. And then on top of that, banks also put a premium on your interest rate if you have low equity as it is more risky for the bank. This premium tends to add an extra 0.25% – 1.50% to your interest rate depending on the bank and how big your deposit is.

 

Tips to Improve Your UMI Result

Now things get interesting. Your UMI test is harder to do online but we have more options to game the system.

One thing to make clear is that this is Uncommitted Monthly Income. Your goal with this test is to reduce your committed monthly expenses as much as possible.

The first thing almost everyone should do is cancel their credit cards, yes, even you who pay it off in full each month and enjoy the rewards. So why do you need to cancel the card? With your mortgage application, banks will assume that you make out your cards each month and then make the minimum repayments. This then leads to high-interest payments that banks will assume you’re making even if you’ve never had to pay interest on your cards in the past. This is because there is nothing at all stopping this from happening so the bank needs to assume worst case scenario.

The next slightly more controversial option is to temporarily pause your KiwiSaver contributions. Now this might sound like a bad financial decision, and yes, you should talk to a financial advisor first however, you can continue to contribute to your KiwiSaver through voluntary payments. In doing this, you’re removing the committed expense and just making voluntary payments which will improve your UMI number whilst still contributing to your KiwiSaver. Please note that this will mean you will no longer be receiving employer contributions and thus I would recommend talking to a financial advisor before making this decision.

The final thing is to clear any low-balance, short-term debt. Stuff that you can just get rid of today to reduce the payments you’re committed to.

For strategies on how to increase your lending potential, read this guide: 5 Ways to Increase Your Mortgage Borrowing Power

 

How to pay less interest on your mortgage

Mortgage brokers like to sell courses for over $3,000 on how to save interest on your mortgage. And if you’ve ever done an extra-payment mortgage calculator. You’ll know that it’s very legitimately possible to save hundreds of thousands in interest payments and become mortgage-free much earlier than the initial 30-year loan term.

I’ll save you a few thousand dollars and put these money-saving strategies below.

 

Increase your mortgage repayments

Increasing the payments you’re making on your mortgage is probably the easiest way to save money on your mortgage and most banks will allow you to do this fee-free through your mobile banking app.

Let’s run a scenario to see how much money this would save you.

Minimum Payments	Paying an extra $400 per month
Loan: $500,000	Loan: $500,000
Interest rate: 4.99%	Interest rate: 4.99%
Monthly Payments: $2,681	Monthly Payments: $3,081
Total interest paid over loan term: $465,179	Total interest paid over loan term: $334,489 (-$130,690)
Mortgage free in: 30 years	Mortgage free in: 22 years 7 months

Even if you’re not currently in a position to make extra payments on your mortgage, pay rises are a great opportunity to start making extra payments on your mortgage.

 

Keep payments the same when interest rates drop

The NZ economy works in cycles, sometimes it’s up, sometimes it’s down. If you’re able to manage the tough periods in the economy with high interest rates, you can set yourself up well to pay down your mortgage faster.

When your fixed interest rate period comes up for renewal, one of the easiest ways to pay down your mortgage faster is to keep your payments the same despite the cheaper interest rate. This means your fortnightly/ monthly payments are the exact same as when interest rates were higher, but you’re now paying off more principal with each payment you make.

 

Make fortnightly payments

There are 12 months in a year but 26 fortnights (52 weeks ÷ 2). So if you simply divide your monthly payment in half and pay that amount every 2 weeks, you end up making 13 full monthly payments per year instead of 12.

That one extra payment goes straight toward reducing your principal, which reduces interest faster.

Monthly Payments	Fortnightly Payments
Loan: $500,000	Loan: $500,000
Interest rate: 4.99%	Interest rate: 4.99%
Monthly Payments: $2,681	Monthly Payments (average): $2,904
Total interest paid over loan term: $465,179	Total interest paid over loan term: $379,695 (-$85,484)
Mortgage free in: 30 years	Mortgage free in: 25 years 4 months

 

Offset accounts

An offset mortgage can help you pay less interest by linking a transaction or savings account to your home loan. Your account balances offset your mortgage balance, so you only pay interest on the difference.

For example, if you have a $500,000 mortgage and $50,000 in linked accounts, you’re charged interest on $450,000. It’s a good idea to use this account as an emergency fund. 

Read: What is a Mortgage Offset Account in NZ?

Do I need a mortgage broker?

Mortgage brokers can be a great way to save time and to apply to multiple banks and non-bank lenders at once. However, they’re not flawless.

 

Pros of using a mortgage broker

• • Access to more lenders – Brokers usually have access to a wide range of banks and non-bank lenders. This means they can shop around for the best rate and deal, saving you time.

• • Free to use (most of the time) – In NZ, most mortgage advisors are paid by the lender, not the borrower. So their service is typically free for you.

• • Expertise & Guidance – They understand the lending criteria and can guide you through the process, especially helpful for first-home buyers or those with unique financial situations.

• • Time-Saving – They handle a lot of the paperwork and communication with the banks, so you don’t have to chase multiple lenders yourself.

• • Help with Complex Situations – Self-employed? Low deposit? Unusual income? Advisors can often find a lender who’s willing to work with your circumstances.

 

cons of using a mortgage broker

• • Limited Lender Panel – Not all brokers work with all lenders. Some banks (e.g., Kiwibank or TSB at times) don’t always deal with brokers, so you might miss out on those offers.

• • Potential Bias – Since brokers are paid by the lender, there’s a small risk they may favor lenders that pay better commissions, even if they’re not the absolute best fit for you.

• • Quality Varies – Not all mortgage advisors are created equal. Some are excellent, others… not so much. It’s worth checking reviews and asking around.