Applying for a home loan in New Zealand is a crucial step towards purchasing a property. This can be a difficult process to come to grasp with, especially if you’re new to the market. The below information will give you an overview of the key details you need to know about NZ Home Loans and how to go about getting one.

Home Loan Lenders

Most home loan applications now originate through a mortgage broker, with a clear shift away from applying directly with a bank. 

Below is a compiled list with New Zealand’s main home loan providers

Main Banks Building Societies/ Credit Unions
Westpac Bluestone Select
ANZ NZCU Baywide
BNZ Resimac
ASB First Mortgage Trust
SBS Heretaunga Building Society
Heartland Bank Liberty
The Cooperative Bank Avanti Finance
New Zealand Bank Logos

Deposit for Home Loan

The first step in saving for a house deposit is to set a savings goal. Lenders will require a deposit to be put towards the total purchase price of your property.

 The deposit you require depends on whether the loan you are seeking is for an owner-occupied home or investment purposes. Using general guidelines, below will give you some information on the minimum deposit required:

First Home Buyers

  • 5% Deposit – The minimum required deposit. Home loans only available through a select panel of lenders
  • 10% Deposit – Options available from majority of home lenders
  • 20% Deposit – Options available with all home lenders

Investment Property

20% Deposit – For investment properties banks and other lender require a minimum of 20% deposit.

Please note: You may be able to use positive equity in your current home to fund this!

First home loan deposit options

 

1

 

Savings

 

 

2

 

Kiwisaver – First time buyers can withdrawal funds for deposit

 

 

3

 

First Home Grant – https://kaingaora.govt.nz/home-ownership/first-home-grant/

 

 

4

 

Sale of any assets – E.g. Vehicles, Shares etc.

 

 

5

 

 

Gift Certificate – Financial support from parents or other relatives

 Types of Home Loans

Table Loan – This the most common type of home loan. Most of the early repayments will pay interest and later payments will gradually repay off the principal proportion of your mortgage.

 

Reducing Balance Loan – With this type of home loan, your repayments at the beginning will be much higher than with other types of home loans, which means you’re paying off more of your principal home loan more effectively by reducing the amount of interest you’re paying.

 

Offset Loan – The total balance in your everyday bank account is subtracted off your mortgage before the interest is calculated, which in turn makes you only pay interest on the difference.

 

Revolving Credit Loan – This workS similar to a large overdraft. Your loan becomes your everyday account, so money flows in and out of your loan balance as you get paid and as you spend and pay bills.

NZ Home Loan Rates

There are two types of interest rates that apply to home loans:

  1. Fixed rate – With a fixed rate home loan the interest rate you pay is fixed for a period of six months to five years. At the end of the term, you may be able to choose to re-fix again for a new term or move to a floating rate.
  • Advantages – Include certainty of your repayments over the loan term and lenders offering competitive special rates. 
  • Disadvantages – There are restrictions on additional repayments, break costs and most importantly, if you take a long-term fixed option there is a chance the floating rate may decrease below the rate you originally signed up for.

 

  1. Floating rate On the flip side, lenders most commonly have floating rate loans which will lift or lower the interest rate based on the wider market change during the loan term. This means your repayments may go up or down.
  •  Advantages – Include flexibility to make changes to your loan, such as the loan term, making additional payments without any cost and you may have the ability to redraw funds or switch loans later on depending your financial needs.
  • Disadvantages – Since rates can change this may increase your repayments over time and having more flexibility with more options with floating rate loans may come at a cost.

Many lenders offer a mix of fixed and floating rates with mortgages, but it is best to seek financial advice in all cases before making your decision.

Mortgage Calculator

The amount you can get approved for a mortgage depends on a number of main factors which include the length of service with your current employer, your income, affordability, credit history and the amount of savings you have as a deposit.

 Using a mortgage calculator will give you a better understanding of how much repayments are and how much you may be able to borrow. Example: https://lendingchoice.co.nz/calculator/

This is best completed by a mortgage broker who understands all the different lenders policies available.

First Home Loan

To be eligible as a ‘first time’ buyer you must have not held any property in your name before making your mortgage application. The benefits of applying as a ‘first time buyer’ is that you have several options to help save for your deposit for your home loan including:

  • Withdrawing funds from your Kiwisaver to help purchase your first home 
  • You may be eligible for grants sourced through the Government
  • To help get you on the property ladder once and for all

Construction Home Loan

This type of loan would be suitable for somebody who wants to construct a new home on existing land. With some lenders you may be able to get conditional approval up to when your property is built. This gives you time to purchase land and then work towards building your property. In some cases, interest only periods may be given by lenders to allow time for the construction.

Investment Home Loan

The difference between an investment property and owning your own home is that you earn an income from it. Returns from property investment come from rental income and from any increase in the value of property over time (Known as capital gains). People buy investment properties to make a long-term profit as prices rise and attempt to sell them for a good return in the future. These types of home loans usually have the most risk involved.

Main fees involved in purchasing property

On top of the cost of your property, you need to budget for the following buying costs:

GENERAL FEE STRUCTURE GUIDE

 

1

 

 

Land Information Memorandum (LIM) Report – Arranged through solicitor

 

 

$250-$400

 

2

 

 

Builders Report

 

$400-$800

 

3

 

 

Registration Fee – Transfer property ownership

 

$80

 

4

 

 

Conveyance Fee – Paid to solicitor to transfer ownership to you

 

 

$900 – $1,500

 

5

 

 

Bank Application Fee – Dependent on lender

 

Up to $400

 

6.

 

 

Agent Fees – Paid to real estate agents

 

2% – 3.5% of property value

 

Once you are the owner of a property other fees you need will consider are:

  • Property rates – This will vary depending on your location and the value of the property. These can vary from $1,500 upwards.
  • House insurance – Lenders will expect you to have cover in place for the cost that it would take to replace your home in the event it is damaged.
  • Life insurance – This is a lump sum that is paid out to the policy owner if the insured person dies or is terminally ill.