How Much Can I Borrow For a Mortgage?

If you’re looking to buy your first home, you might be wondering about your borrowing power. Canstar breaks down how to calculate what you can borrow, what repayments look like and what minimum surplus is.

How Much Can I Borrow For a Mortgage? In this story we cover:

Calculating how much you can borrow

Let’s begin with calculating how much you can borrow for a property. The amount you can borrow for a home depends on two things:

  1. How much you can afford to repay on your current income
  2. The sum a lender will lend on a property

Lenders want to be sure that you’ll be able to keep up with your repayments and still have enough money left over to live on. But know that there’s no standard, and each lender will have a different way of working this out.

The amount you’ll be able to borrow rests on your financial health. That means a bank will look at your income, your partner’s (if you’re applying together), as well as any assets you have.

These will be weighed up against your current expenses and any debt you have (like student loans, personal loans, etc). The difference between the two figures basically gives the potential lender an idea of how much you’d be able to pay back each month comfortably. 


Sally earns $70,000 a year and her partner Jack earns $60,000, giving a combined income of $130,000. They have no dependents and their living expenses come out at $36,000/annually. Assuming the loan that they take out will be paid off over 25 years, and plugging in the interest rate as 3.75%, the couple could afford to borrow up to $900,000. 

The Canstar Home Loan Borrowing Power Calculator calculates a hypothetical maximum loan amount that a borrower can apply for, based on the income and expenses entered into the calculator. This is called your borrowing power. You can plug in your own numbers to get an idea here. Keep in mind, though, it’s an estimate and not set in stone.

how much can I borrow

How do I know what I can afford to repay?

Percentage of income

Some experts say fixed payments (mortgage repayments plus any other loan payments) should be no more than 30-40% of gross income. So if you know your income and what your existing fixed payments are, you can work backwards to find the level of mortgage repayment a lender will potentially allow.

You can experiment from there and see what size loan you could afford with these repayments. Consider, too, the impact on your ability to meet your repayments if interest rates go up. Again, our calculator can help you there.

Minimum surplus, what is it?

Some lenders in NZ calculate a ‘minimum surplus’ that we should have left over each month after fixed payments and a living allowance are deducted. This is called ‘UMI’ (uncommitted monthly income) and varies from bank to bank.

If you’re looking to borrow a high proportion of the purchase price, lenders will expect you to have more spare income. This is so you can deal better with any future uncertainties, like a rise in interest rates or a reduction in income.

For example, if someone wants to borrow 95% of a home’s value, some banks will want to see a UMI of $750 to $1000 a month. 

how much can I borrow

What effect does getting flatmates have?

If you’re looking to get flatmates in to help pay the mortgage, know that some lenders will count 70% to 80% of their rent towards your income. Other lenders won’t include any. It pays to shop around and do your research.

Does having a good credit score count?

Your credit score could potentially be the defining factor when it comes to your creditworthiness. In other words, how suitable you are to receive credit. A lender will calculate your credit score based on several factors, including the amount of credit you’ve accessed in your life, who you accessed it from, and how good you were at paying it back. 

If your credit score isn’t as high as you’d like it to be, it doesn’t necessarily mean that you can’t get a home loan. However, you may only be eligible for certain home loans, with potentially higher interest rates and fewer features.

There are lenders out there who specialise in home loan products designed for people with less-than-perfect credit scores. Their products may not be as attractive as some other home loans, but they could be a starting point worth consideration. 

It may be a good idea to refresh your knowledge of what your current credit score is, and think about whether you could be doing more to maintain and/or improve it. 

How do I find the best home loan rate in NZ?

Make sure you’re looking at home loan products that offer you the best value possible. Thankfully, you can compare home loans across the market to find the right option for you with Canstar. Just hit the button below to start comparing:

Compare home loan rates for free with Canstar!

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