FIRST HOME BUYERS · 8 October 2026 · Written by Arapeta Albert, Financial Adviser (FSP433026)
A do-up costs less on the day, but a lender sizes the mortgage on the house as it stands, and the renovation is a second sum of money. That can make the cheaper house the one that needs more cash.
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Aroha and Sam have $160,000 saved between KiwiSaver and the bank, and two first homes on their shortlist. One is finished and priced at about $800,000. The other is a tired 1960s house a few streets away at about $700,000, which a builder friend thinks needs $100,000 of work: kitchen, bathroom, wiring and a roof. (Aroha and Sam are a composite, not real clients.)
The do-up feels like the careful choice. It is $100,000 cheaper on the day, and once the work is done they would own much the same house. But when you buy a do-up in New Zealand, the mortgage is sized on the house as it stands on purchase day, and the renovation is a second sum of money that has to come from somewhere. That changes which of the two houses their savings can reach.
A lender generally works from the purchase price, or from a valuation of the property in its current condition. The value a renovation is expected to add is not there yet, so it is not counted yet. Here are the two purchases side by side, as an illustration in round numbers.
The cheaper house leaves them $80,000 short. If that $80,000 were added to the loan, the loan would be $640,000 either way. Against the finished house that is 80 percent of the value. Against the do-up, valued at $700,000 as it stands, it is about 91 percent.
Sometimes, and the route matters. There are broadly three.
Pay for it from savings. Simple, but it needs cash beyond the deposit, which is what most do-up buyers are short of.
Borrow it up front on a low deposit. This is the part of bank lending the Reserve Bank rations: banks may write up to 25 percent of new owner-occupier lending to buyers with less than a 20 percent deposit (Source: RBNZ; see our current NZ lending rules). It is a busy queue. interest.co.nz reported on 25 September 2026 that just over half of the mortgages approved to first home buyers in August were low equity loans, on Reserve Bank data. Our article on low deposit home loans in NZ covers what that route costs.
Have the lender work from the finished value. Consumer NZ describes renovation lending that is based on what the home will be worth once the work is complete, where the bank may ask for a valuation of the finished property and pays invoices as they arrive instead of handing over a lump sum. That tends to mean plans, quotes and a registered valuation in hand before the offer goes unconditional, and whether a lender will do it varies.
In our experience at Trebla, buyers plan a do-up around the purchase price and meet the renovation money afterwards, as a surprise. Borrowing it later, once the work has lifted the value, is possible, but a mortgage top-up is a new application under the rules on the day you ask.
A lender is lending against a home someone can live in and insure. Paint, carpet and a dated kitchen rarely trouble it. A house with no working kitchen or bathroom, a serious structural or weathertightness problem, or building work done without council consent is a different conversation. The lender may want a registered valuation or a larger deposit, or may not lend until the problem is fixed, and policy varies between lenders.
So the builder's report and the council property file are not only for the buyer. They help decide whether the loan exists.
Three things rarely make the first budget.
Rent. If the house cannot be lived in during the work, the household carries rent and a mortgage together, and a lender may count both.
Overruns. Old houses hide things, and a loan does not grow just because the quote did.
Insurance. Consumer NZ notes that ordinary home insurance does not cover the specific risks a building project creates, and that structural work calls for contract works cover. The insurer needs to hear about the plan as well as the lender.
If the house is going to auction, a winning bid is unconditional: no finance condition and no builder's report condition. For Aroha and Sam, the order matters more than the price. The inspection, the quotes and the lending conversation all have to happen before auction day, because afterwards the only thing left to adjust is their own cash.
None of this makes a do-up a poor idea. Plenty of first homes start as one, and our first home buyer guide for 2026 covers the wider path. It does make it a purchase with two budgets, and that is something a Financial Adviser would work through with you before you bid.
Often, yes. A house that is liveable and insurable but dated is usually treated like any other purchase. A house that cannot be lived in, has a serious structural or weathertightness problem, or has unconsented building work is harder, and lender policy varies. Trebla Partners Limited (FSP728251) can look at a specific property with you, and you can book a chat at book.trebla.nz.
Sometimes. A lender generally sizes the loan on the purchase price or the current value, so adding renovation money pushes the loan to a higher share of that value. Some lenders will instead work from a valuation of the finished property and release the money in stages as work is done. Whether either is available depends on the lender, the project and your deposit.
The deposit on the purchase can be smaller in dollars because the price is lower, but the renovation has to be paid for as well. Unless a lender funds the work, the total cash needed can be higher than for a finished home at a higher price. Under Reserve Bank settings, banks may write up to 25 percent of new owner-occupier lending to buyers with less than a 20 percent deposit.
Not always, but a lender can ask for one, or for a registered valuation, where the condition of a house is in question. It is also the main way a buyer finds out what the work is likely to involve. At an auction it has to be done before the day, because a winning bid is unconditional.
It can, but it is a new application. A lender will usually want evidence of the new value, such as a registered valuation, and will assess income, debts and the Reserve Bank settings as they stand on the day you ask. A higher value does not by itself create a right to borrow against it.
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This article is general in nature and is not financial advice. It is published by Trebla Partners Limited (FSP728251), a licensed Financial Advice Provider. Lending criteria, lender policies and Reserve Bank settings vary and change regularly, and the figures used are an illustration, not a forecast, a valuation or a building estimate. Always seek advice specific to your situation before making decisions. Read our disclosure statement →
