9 Things to Know About NZ Mortgage Advisers

Buying a home can involve a lot more than finding the lowest advertised interest rate. Your deposit, income, debts, employment, credit history and chosen property can all affect your options.

New Zealand mortgage advice can help you understand how lenders assess applications, which pathways may be available and what you need to prepare.

Here are nine important things to know before applying for a home loan.

1. Mortgage advisers compare the lenders they work with

A bank can explain its own products and lending criteria. A mortgage adviser can compare options from the lenders on their panel.

This may include differences in:

• Deposit requirements
• Interest rates, fees and incentives
• Income assessment
• Affordability calculations
• Property requirements
• Loan structures
• Policies for self-employed borrowers

Not every adviser works with every lender. Ask which lenders they can recommend, how they are paid and whether you may be charged a fee.

The FMA’s mortgage advice guide explains what borrowers should expect when receiving mortgage advice.

2. Pre-approval gives you a guide, not a guarantee

Pre-approval provides an indication of how much a lender may be willing to lend, subject to its conditions.

It can help you:

• Set a realistic property budget
• Understand the deposit you may need
• Identify application issues early
• Avoid looking at homes outside your likely price range
• Make offers with clearer finance conditions

However, pre-approval does not mean every property will be accepted. The lender may still need to approve the property, valuation, insurance and final purchase agreement.

Pre-approvals also expire, so check the validity period before relying on one.

3. KiwiSaver may be used towards your first-home deposit

If you have been a KiwiSaver member for at least three years, you may be able to make a KiwiSaver first-home withdrawal.

Eligible members can generally withdraw:

• Their own contributions
• Employer contributions
• Government contributions
• Investment earnings

You must leave at least $1,000 in your KiwiSaver account. The property must usually be intended as your main home rather than an investment property.

Previous homeowners may also qualify in some circumstances.

Your KiwiSaver provider processes the withdrawal, with the approved funds normally paid to your solicitor. Processing times and document requirements vary, so contact your provider well before settlement.

You can review the current rules through Inland Revenue.

4. You may not need a 20% deposit

Having a 20% deposit will usually give you more lender options, but some buyers can purchase with less.

Low-deposit pathways may include:

• A standard bank loan within the lender’s low-deposit allocation
• A Kāinga Ora First Home Loan
• A family gift
• Family equity or a limited guarantee
• Equity from another property
• Certain new-build lending options

A First Home Loan can reduce the required deposit to 5% for eligible buyers. Income limits, eligibility requirements and the participating lender’s normal affordability criteria still apply.

Reserve Bank rules currently allow banks to make a limited proportion of new owner-occupier loans to borrowers with less than 20% equity. This does not guarantee approval, as each lender decides how it uses that capacity and which borrowers it will accept.

5. Deposit sources are assessed differently

House deposit strategies often combine more than one source of money.

Your deposit could include:

• Personal savings
• KiwiSaver
• A non-repayable family gift
• An inheritance
• Proceeds from selling another asset
• Family equity
• Borrowed funds

The lender will want to confirm where the money came from.

A genuine gift is generally treated differently from a family loan. If the money must be repaid, the lender may include those repayments when assessing affordability.

Family guarantees and shared ownership arrangements can also create significant risks. Everyone involved should get independent legal advice before agreeing to them.

6. The lowest rate is not always the best option

Interest rates matter, but they are only one part of choosing a home loan.

You should also consider:

• Application and ongoing fees
• Cashback conditions
• Early repayment rules
• Fixed-rate break costs
• Offset and revolving credit options
• Extra repayment flexibility
• How the lender assesses your income
• Whether the lender will accept the property

A slightly lower rate may not provide the best overall outcome if the loan is inflexible or does not suit how you manage your money.

Home loan advisers can explain the trade-offs between cost, flexibility and lender criteria.

7. Self-employed income is assessed differently

Being self-employed does not prevent you from getting a mortgage, but you may need to provide more information than a salaried employee.

Depending on the lender, this could include:

• Financial statements
• Income tax returns
• IRD income summaries
• GST returns
• Business bank statements
• Management accounts
• Details of business debts
• An explanation of changes in revenue or expenses

Lenders may also interpret the same accounts differently. Some may consider certain non-cash expenses or one-off costs, while others may rely more closely on taxable profit.

For complex home loans, matching the application with the right lender can be just as important as the income figure itself.

8. Your financial behaviour affects the application

Lenders review how you manage money, not just how much you earn.

They may look at:

• Existing loan repayments
• Credit card and overdraft limits
• Buy now, pay later accounts
• Unarranged overdrafts
• Missed or late payments
• Regular living expenses
• Account conduct
• Credit history
• Recent applications for finance

Before applying, it may help to reduce unnecessary debt, review unused credit limits and make sure repayments are made on time.

Avoid submitting applications to several lenders without a clear reason. Multiple credit checks can complicate the application and will not fix an underlying affordability or credit issue.

9. Mortgage advice continues after approval

Approval is an important step, but the loan still needs to be structured.

Common options include:

• Fixing the entire loan
• Splitting the loan across different fixed terms
• Keeping part of the loan floating
• Using an offset account
• Using revolving credit
• Allowing for extra repayments

The right structure depends on your cash flow, savings habits, future plans and comfort with changing interest rates.

Your mortgage should also be reviewed when your fixed term ends or your circumstances change. This could include a new job, business growth, renovations, separation, a growing family or plans to buy another property.

When should you speak with a mortgage adviser?

Consider getting advice before you begin making offers, particularly if you:

• Are buying your first home
• Plan to use KiwiSaver
• Have less than a 20% deposit
• Are self-employed
• Earn commission, overtime or contract income
• Have existing debts
• Want to buy an apartment, new build or unusual property
• Have previously been declined
• Need a more complex home loan

A mortgage adviser cannot guarantee approval. However, they can help you understand the criteria, prepare the required documents and identify lenders that may be better suited to your circumstances.

If you are considering buying a home, Luminate can help you understand your options before you apply.

This article provides general information only and is not personalised financial advice. Lending criteria, terms, conditions and affordability assessments vary between lenders. Loan approval is not guaranteed.