How much can I borrow?

A vital question, and one that needs an answer before you even start thinking suburbs or house size.
It depends on many things, not just income and deposit. Let’s work it out.
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The big questions

When it comes to home loans, your income plays the leading role. But there are some other important factors too:

  • What have you got as deposit?
  • What kind of property are you trying to buy?
  • How does your income look over the next few years?
  • What are your living expenses?

A rough guide to what you can borrow

Take your income and multiply it by 4 or 5 times. If you’ve got existing debt or kids, stick with 4 times. If you’re kid-free, with no debt, you can probably stretch to 5 times. The resulting number is a ballpark figure of what you can borrow. BUT there’s no way you should rely on a ballpark figure if you’re serious about buying a house. So talk to us about your plans and we will quickly work out the ideal type of home loan and amount you can borrow… and realistically pay back.
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Think big on deposit

While a larger deposit means less interest over time, a big deposit is rarely possible, especially in Auckland! If you haven’t scraped the cash together, take heart! Most deposits these days aren’t a stack of savings – they’re pieced together from a variety of sources. We can help you compare some deposit options available to you.

For the majority of home loans, banks only lend up to 80% of a property’s value. A mortgage with 10% deposit is totally doable but the criteria are tougher and it is more expensive.

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Got questions? No worries, there aren’t many we haven’t heard before – get in touch and ask away.
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What’s the best mortgage structure for me?

Different strokes for different folks – options that work best for your income, your stage of life, the size of your loan. Here are some things to consider…

Maximum Mortgage Term

  • Home loans usually have a maximum term of 30 years, but if you structure yours well there’s no reason to be tied to the bank for that long.

Fixed Rate Mortgage

  • Your interest rate stays the same for a fixed term that you specify – between 1 and 5 years.
  • Gives you certainty that the same amount is going out every payment for that term.
  • You may save if the interest rate goes up, or miss out on savings if it goes down.

Floating Mortgage

  • A floating interest rate mortgage gives you more freedom.
  • You can pay more than the minimum and even drop lumps sums in whenever you want.
  • Flexibility comes at a cost (higher interest rate) although it can be worth it for some people.

Mixing It Up

  • It pays to bear in mind that you could structure your lending with more than one type of home loan, giving you both stability and flexibility.
  • We can help you figure out what is the right mix for you.

Payment Frequency

  • If you can, try to keep this in line with when you get paid – it makes things much easier.
  • Most banks let you pay fortnightly or monthly.

Revolving Credit

  • Works like a transaction account with a huge overdraft – only the overdraft is charged at mortgage rates.
  • Idea is, you put all your income and savings toward the mortgage so it’s knocking back the interest, then draw your living expenses out as you need to.

Offset

  • A smart way to use the balance in your savings accounts to reduce the interest you pay on your mortgage.

Interest-Only Mortgage

  • Ideal for a period where your income drops eg. birth of children, or if you don’t want to pay principal, eg. on a rental property.
  • Usually available to mortgages under 80% of the property value or purchase price.
  • Terms can be for 2 or 5 years depending on the bank.

Ask us which mortgage is right for you

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Forsyth Barr House, 19 Tamariki Avenue, Orewa, Auckland 0931
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