Do Banks Check Your Spending Before Approving a Mortgage?

Yes, New Zealand banks generally check your spending when assessing a mortgage application.

They may review your bank statements, regular expenses, existing debts and spending patterns to determine whether you can comfortably afford the proposed mortgage repayments.

However, the bank is not necessarily judging every coffee, takeaway or weekend purchase. The bigger question is whether your overall mortgage spending habits in NZ leave enough money available to manage a home loan without causing financial hardship. 

Why do banks check your spending?

Banks have responsible lending obligations under the Credit Contracts and Consumer Finance Act 2003.

Before approving a mortgage, a lender must make reasonable inquiries to satisfy itself that you are likely to afford the repayments without suffering substantial hardship. Although the prescriptive affordability regulations were removed on 31 July 2024, banks must still complete an affordability assessment. They now have more flexibility in how that assessment is conducted.

This means the bank will usually compare:

• Your regular income
• Your existing debts and financial commitments
• Your normal household expenses
• The proposed mortgage repayments
• The money you would have left after everything is paid

Banks may also test your application using an interest rate higher than the advertised home loan rate. This helps them assess whether you could continue making repayments if rates or other costs increased.

What expenses do banks look at for a mortgage?

Your mortgage application expenses will usually include both essential household costs and ongoing financial commitments.

Common examples include:

Banks can ask about day-to-day costs such as food and travel, as well as existing loans and other financial commitments.

The categories and calculations used can vary between lenders. One bank may assess an expense differently from another, particularly where costs are shared between applicants or other members of the household.

How far back do banks check your spending?

A common question is: how far back do banks check bank statements for a mortgage?

In many cases, expect to provide between three and six months of bank statements.

For example:

• ANZ says applicants with non-ANZ accounts generally need to provide their last three months of statements.
• Kiwibank currently lists bank statements from the past three months among its application requirements.
• ASB’s general application guide asks non-ASB customers for three months of statements, while its first-home buyer guidance refers to six months.

The exact period depends on the lender, application type and complexity of your financial position. The bank may request additional statements where income is irregular, expenses need clarification or information is missing.

When preparing bank statements for a mortgage in NZ, it is sensible to have at least six months available, even if the lender initially asks for less.

Will coffees and takeaways stop you getting a mortgage?

An occasional coffee or takeaway is unlikely to decide your entire application.

The bank is generally more interested in the overall picture:

• How much you regularly spend
• Whether your expenses are sustainable
• Whether your statements match the figures declared in your application
• How much money remains after your expenses
• Whether the proposed mortgage would place you under financial pressure

A $6 coffee is not usually the issue. Spending $800 more than you earn every month might be.

Regular discretionary spending can still reduce the amount you are able to borrow. Even small subscriptions and purchases can add up when they appear every week or month.

What spending habits could concern a bank?

Transactions that suggest ongoing financial pressure or undisclosed commitments may lead to more questions.

Examples can include:

• Regularly using an unarranged overdraft
• Missed loan, rent or credit card payments
• Multiple active Buy Now Pay Later repayments
• Frequent cash advances
• Large recurring transfers that have not been declared
• New personal loans or credit accounts
• High spending compared with your income
• Regular transactions that materially reduce your available monthly surplus

This does not mean an application will automatically be declined. The lender may simply ask for an explanation, additional information or evidence that a particular expense was temporary.

The worst approach is hiding or understating an expense. Applicants are expected to provide accurate and complete information, and false information can affect both the application and the borrower’s protections if financial problems arise later.

Should you reduce your spending before applying?

It can be helpful to review your spending several months before making a mortgage application, but you do not need to make your statements look unnaturally perfect.

Start by identifying:

1. Subscriptions you no longer use
2. Short-term debts that could reasonably be cleared
3. Unnecessary recurring payments
4. Spending that regularly pushes your account into overdraft
5. Expenses that have not been included in your budget
6. New debt applications that could be delayed

You could also start transferring the difference between your current rent and expected mortgage costs into savings. This helps build your deposit or emergency fund while testing whether the higher housing cost feels manageable.

BNZ recommends considering whether your current spending would allow you to comfortably manage a mortgage and suggests living as though you already have the home loan for at least three months before applying.

Do not move spending to another account simply to hide it. Banks may request statements for multiple accounts, including accounts used for wages, bills, credit cards, savings or everyday purchases.

Do banks check credit cards and Buy Now Pay Later?

Yes, lenders will generally want details of existing debts and credit commitments.

This can include:

• Credit cards
• Personal loans
• Vehicle finance
• Store cards
• Hire purchases
• Buy Now Pay Later accounts
• Student loan deductions
• Existing mortgages

ASB, for example, says applicants may need statements showing balances for loans, credit cards, hire purchases and store cards. Kiwibank also asks for a list of debts and expenses.

Even when a credit card has a low or zero balance, the available limit may still be considered by some lenders because you could use that credit later.

Before closing or reducing any lending facility, speak with your mortgage adviser. Paying off debt can improve affordability, but using your entire deposit or emergency buffer may create a different problem.

What if you are self-employed?

Banks can look beyond your personal spending when you are self-employed.

Depending on the application, you may need to provide:

• Personal bank statements
• Business bank statements
• Recent financial statements
• Tax returns or income summaries
• Evidence of drawings or shareholder salary
• Details of business debts
• An explanation of unusual or one-off transactions

ANZ and ASB both state that self-employed applicants may need up-to-date financial statements prepared through an accountant.

Separating personal and business spending can make the assessment much clearer. It also helps the lender understand which expenses are essential business costs and which are personal commitments.

Can a mortgage adviser review your spending first?

A mortgage adviser can review your position before submitting the application and help identify anything that may require an explanation.

This could include:

• Calculating realistic household expenses
• Identifying debts affecting your borrowing power
• Explaining irregular deposits or transfers
• Checking which documents a lender is likely to request
• Comparing lenders with different servicing criteria
• Helping self-employed applicants present their income clearly

The aim is not to make your finances look better than they are. It is to present a complete, accurate application to a lender that suits your circumstances.

Frequently asked questions

Do banks check every transaction before approving a mortgage?

Banks may review the transactions shown on the statements provided, but their assessment is generally focused on affordability, financial commitments and recurring spending patterns rather than judging each individual purchase.

How many months of bank statements do I need for a mortgage?

Three months is common, but some applications may require six months or more. Requirements vary between banks and can depend on your income, account history and application type.

Can spending too much cause a mortgage application to be declined?

Yes. If your regular expenses leave insufficient money to manage the proposed repayments, the bank may reduce the amount it will lend or decline the application.

Will gambling transactions affect a mortgage application?

They can prompt questions where they are frequent, significant or reduce the money available for mortgage repayments. The outcome will depend on the wider application and the lender’s criteria.

Do banks check statements after pre-approval?

They may. A pre-approval is normally conditional, and the lender can request updated statements or financial information before issuing unconditional approval or settlement, particularly if the original approval has expired or your circumstances have changed.

Should I stop using Buy Now Pay Later before applying?

Reducing short-term debt may improve your affordability, but the best approach depends on your wider finances. Avoid taking on new commitments and speak with an adviser before making major changes.

Get your mortgage application ready

Your spending does not need to be flawless, but it does need to show that the proposed mortgage is realistic and affordable.

At Luminate, we can review your income, expenses and existing debts before approaching a lender. We will help you understand what may affect your application and explore suitable home loan options based on your circumstances. 

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.