Lending Guide
Banks will tell you what you can borrow. We'll help you work out what you can actually afford — which is often a very different number, and far more important.
In this guide
These two numbers are not the same — and confusing them is one of the most common mistakes new buyers make. Banks calculate the maximum they're willing to lend based on your gross income and liabilities, with a stress-tested interest rate applied to ensure the debt is theoretically serviceable. But that maximum borrowing amount isn't advice about what you should borrow.
Your own budget analysis is what matters. The real question isn't "can I technically afford this repayment?" — it's "can I afford this repayment while still living the life I want, building savings, and handling unexpected costs?"
What the bank calculates
What you need to calculate
A couple with a combined gross income of $160,000 may be offered a maximum mortgage of $950,000. Monthly repayments on $950,000 at 6.5% over 30 years = approximately $6,004. Their combined net income after tax is approximately $120,000, or $10,000/month.
After mortgage repayments of $6,004, they have $3,996 for everything else — food, transport, insurance, rates, utilities, childcare, entertainment, maintenance, and savings. That may be workable, or it may leave them stretched with nothing to spare. Only their own budget analysis reveals the truth.
A useful starting point, not a hard limit
A commonly cited guideline suggests keeping housing costs below 30% of gross household income. It's a reasonable benchmark for middle-income earners in affordable markets. But in New Zealand — where median house prices in Auckland and Wellington are 8–12x median household income — it's often disconnected from reality.
| Region | Median house price | 20% deposit | Monthly repayment* |
|---|---|---|---|
| Auckland | ~$1,000,000 | $200,000 | $5,057 |
| Wellington | ~$750,000 | $150,000 | $3,793 |
| Christchurch | ~$620,000 | $124,000 | $3,133 |
| Hamilton / Tauranga | ~$700,000 | $140,000 | $3,541 |
*Monthly repayment at 6.5% p.a. over 30 years on 80% LVR. Figures are indicative.
In Auckland, meeting the 30% rule requires a gross household income of approximately $202,000. The median Auckland household income is around $110,000 — meaning the 30% guideline is out of reach for most buyers. This doesn't mean they can't buy, but it does mean the budget analysis needs to be more careful.
A structured approach to knowing your real number
Use this framework to work from your gross income down to what's genuinely available for a mortgage. Be honest — optimistic budgets are the single biggest source of mortgage stress.
| Item | Your amount | Notes |
|---|---|---|
| Income | ||
| Gross household income (monthly) | $________ | All income before tax |
| Less: Income tax & ACC | – $________ | Use IRD's PAYE calculator |
| = Net monthly take-home | $________ | Starting point for all costs |
| Fixed Expenses | ||
| Rates (council) | – $________ | Check council website for your target area |
| Home insurance | – $________ | $150–$300/month typical |
| Contents insurance | – $________ | $50–$100/month typical |
| Life / income protection insurance | – $________ | Essential when carrying a mortgage |
| Existing loan repayments | – $________ | Car loans, personal loans, student debt |
| Living Costs | ||
| Groceries & household | – $________ | Use your last 3 months of bank statements |
| Transport (fuel, registration, WOF) | – $________ | Monthly average |
| Utilities (power, gas, internet, phone) | – $________ | $350–$600/month typical household |
| Childcare / school fees | – $________ | Include any expected changes |
| Entertainment, dining, subscriptions | – $________ | Be realistic — don't budget to cut this entirely |
| Homeownership Reserves | ||
| Property maintenance reserve | – $________ | Budget 1% of property value per year, set aside monthly |
| Emergency savings (monthly contribution) | – $________ | Target 3 months of expenses in a buffer |
| = Available for mortgage repayment | $________ | This is your real mortgage affordability ceiling |
Can your budget survive a rate rise or income shock?
Interest rates change. Incomes can change too — redundancy, parental leave, illness, or a business downturn can all reduce what's coming in. Before you commit to a mortgage size, ask yourself: what happens to my budget in each of these scenarios?
| Interest rate | Monthly repayment | Fortnightly repayment | vs base rate |
|---|---|---|---|
| 6.0% (base) | $3,597 | $1,799 | — |
| 7.0% (+1%) | $3,993 | $1,997 | +$396/mth |
| 8.0% (+2%) | $4,404 | $2,202 | +$807/mth |
| 9.0% (+3%) | $4,828 | $2,414 | +$1,231/mth |
A 2% rate rise adds over $800/month to your repayment. Does your budget survive that? If not, consider a smaller loan or a larger deposit to reduce the loan amount.
What if one income stops?
For dual-income households, test your budget on one income alone. Parental leave, redundancy, or illness can reduce income quickly. A mortgage that requires both full incomes to be comfortable is a higher-risk position. Most advisers recommend leaving a buffer that works on 70–80% of current income.
The role of income protection
Income protection insurance pays a percentage of your income if illness or injury stops you from working. For anyone carrying a mortgage, this is not optional — it's the safety net that keeps the repayments going when your income doesn't. Talk to us about getting cover in place alongside your mortgage.
What they're looking for in your bank statements
When you apply for a mortgage, your bank will scrutinise 3–6 months of bank statements in detail. Understanding what they're looking for — and how to present your finances well — can be the difference between a smooth approval and a frustrating decline.
Consistent savings pattern
Regular deposits to a savings account (not just accumulation by default) demonstrate financial discipline. Ideally 3–6 months of visible saving behaviour before you apply.
No overdraft use or dishonours
Regularly going into overdraft or having payments dishonoured (bounced direct debits) signals financial stress. Lenders will scrutinise this carefully and may use it to decline or reduce approval.
Regular income visible
Lenders want to see consistent income deposits matching your payslips. Unexplained large deposits can raise questions — keep records of any non-salary income sources (gifts, asset sales, freelance work).
Responsible spending
Excessive gambling transactions, frequent buy-now-pay-later use, or erratic spending patterns can raise concerns. Lenders benchmark your actual spending against the proposed mortgage repayment to assess affordability.
Why 3 months of expenses matters more when you own a home
When you rent and something goes wrong — a broken heater, a flooded bathroom — your landlord fixes it. When you own, you fix it. An emergency fund isn't just good financial practice; it's a practical necessity of homeownership.
The goal: 3 months of total living expenses (including mortgage repayment) in accessible savings. On a $600,000 mortgage with $5,000/month in total costs, that's a $15,000 buffer. It sounds large, but it can be built gradually — $200/fortnight will get there in 18 months.
Your emergency fund should be accessible within 24–48 hours — not locked in a term deposit or invested in KiwiSaver. Options include:
Now you understand the full picture, here's how to put it into practice:
Repayment Calculator
Model different loan sizes, rates, and terms. Use the insights to see what switching to fortnightly or adding extra repayments saves you.
Open calculator →Deposit Calculator
Work out how long it will take to save your deposit, including your KiwiSaver withdrawal.
Open calculator →Talk to a Trebla adviser
We'll run through your specific numbers, check your full financial picture, and give you a clear view of what you can realistically afford — at no cost to you.
Book a free chat →Also in our lending guides
This guide is general in nature and is not financial advice. Lending criteria, interest rates, and government schemes change regularly. Always seek advice specific to your situation from a qualified mortgage adviser. Read our disclosure statement →
