NEXT HOME · 2 October 2026 · Written by Arapeta Albert, Financial Adviser (FSP433026)
Moving up is not a bigger version of your first purchase. It is a new loan application, made by a different household, and the things that changed are the things a lender counts.
In this article
Mere and Tom bought their first home six years ago on two full incomes and no children. They now have a three year old, a second baby due, and Mere is back at work three days a week. Their home is worth about $800,000 with $500,000 owing, and the homes they are looking at sit around $1,200,000. (Mere and Tom are a composite, not real clients.)
They assume the hard part is behind them: they have equity and six years of repayments made on time. Both help. But upgrading from a first home to a family home in New Zealand is a brand new loan application, assessed on the household as it is today, under today's rules, using the equity that is left after the sale. Each of those three has moved since they last applied.
The move needs a loan of roughly $900,000, and it has to pass two gates. The first is the debt to income setting: the Reserve Bank lets banks write up to 20 percent of new owner-occupier lending above a debt to income ratio of six, in force since 1 July 2024 (Source: RBNZ). It did not exist when Mere and Tom bought. At six times income, $900,000 asks for about $150,000 of household income. (See our current NZ lending rules.)
That gate counts income and debt and nothing else. It does not notice children. The second gate, the servicing test, does. It works from what is left after living costs, and those rise with every dependant. Childcare is a cost. An income on reduced hours is read as it is now, not as it was.
So the reason for the move is the thing that shrinks the number. In our experience at Trebla, this surprises second-time buyers more than anything else: they earn more than they did at the first purchase, and the lender will stretch less far on it. How much you can borrow and the mortgage stress test cover the mechanics.
On paper Mere and Tom have $300,000 of equity. A deposit is what lands in the solicitor's trust account on settlement day, and that is a smaller number. It starts from the price a buyer actually pays, not an estimate. Off that come the agent's commission and marketing, legal costs, and the cost of repaying the current loan.
Repaying a loan part way through a fixed term can carry an early repayment charge, and a cash contribution received in the last few years may be partly repayable if the new loan goes to a different lender, which our article on refinance cashback in NZ covers. Some lenders will move an existing fixed loan across to the new property instead, and policy on that varies.
It is a common belief: if every price falls by the same percentage, the dearer house falls by more dollars, so the gap narrows. It is timely too. interest.co.nz reported on 1 October 2026 that the Cotality Home Value Index showed the national median dwelling value falling for a sixth consecutive month in September, and that stock for sale on Realestate.co.nz was at its highest September level since 2014.
Here is the same move with both homes 10 percent lower, as an illustration, not a forecast.
The loan is $40,000 smaller, and the deposit has gone from a quarter of the price to about a fifth. The mortgage did not fall with the market, so the whole fall landed on the equity. Take selling costs off and the deposit drops under 20 percent, which 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).
Each order carries a different risk. Selling first fixes the deposit to the dollar and can leave a gap with nowhere to live. Buying first secures the home and leaves an unsold one to carry. With this much stock for sale, the second risk is the one that has grown. Bridging finance in NZ covers the overlap, and refinancing your mortgage in NZ covers a change of lender.
A lender tests the new loan against interest rates rising. Nothing in the application tests what happens if the larger income stops. For Mere and Tom that is the point of greatest exposure: the biggest loan they have ever had, more people relying on it, and one income doing more of the work.
It is worth naming before an offer goes unconditional, and it is one of the questions a Financial Adviser would work through with you.
There is no general answer. Selling first tells you exactly what deposit you have and removes the risk of carrying two homes, but it can leave a gap between homes. Buying first secures the next home but relies on the current one selling in time and at the price expected. Trebla Partners Limited (FSP728251) can map both against your situation, and you can book a chat at book.trebla.nz.
Under Reserve Bank settings, a deposit of 20 percent or more sits inside standard owner-occupier lending. Banks may write up to 25 percent of new owner-occupier lending to buyers with less than that, so a smaller deposit is possible but competes for limited capacity. When you are upgrading, the deposit is the equity left after the sale and its costs, not the equity on paper.
It can. The debt to income setting counts only income and debt, but a lender's servicing test works from what is left after living costs, and those rise with each dependant. Childcare costs and reduced working hours also feed into that test as they stand at the time of the application.
Sometimes. Some lenders will transfer an existing fixed loan to the new property rather than have it repaid, and policy varies by lender. Where a loan is repaid during a fixed term, an early repayment charge may apply. It is worth asking the lender or a Financial Adviser before the home is listed.
It is possible, but it changes the assessment. Without a sale there is no sale money, so the deposit for the next home has to come from equity or savings, and both loans are counted together. Reserve Bank settings for new investor lending are also tighter than for owner-occupiers: banks may write up to 10 percent of it above a 70 percent loan to value ratio, and up to 20 percent above a debt to income ratio of seven. The tax position is one for an accountant.
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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 or a valuation. Always seek advice specific to your situation before making decisions. Read our disclosure statement →
