How Much Can I Borrow to Buy a House?

If you’re planning to buying a first home, the amount you’ll be able to borrow will be reliant on a wide range of factors. The two most important are:

• Your income
• The size of your deposit

However, banks and other mortgage lenders will also take into consideration your other liabilities and wider financial history, including:

• Student debt and other personal loans
• Credit card limits and balances
• The number of children and other dependents reliant on you
• Your savings history
• Everyday living expenses

Even if you earn a great wage, if you’ve no proven track record of saving or financial responsibility, your borrowing power will take a hit.

Banks are also bound by financial legislation that promotes responsible lending, these include loan-to-value ratios (LVR) and debt-to-income (DTI) restrictions, which are set by the Reserve Bank of New Zealand. However, these restrictions only apply to banks and don’t cover Kāinga Ora loans or mortgages for new builds.

Individual mortgage lenders also apply their own stress tests to ensure that borrowers can cope with any possible repayment increases due to interest-rate rises.

For example, at time of writing, the average two-year fixed rate on Canstar’s database is 5.15% p.a. However, banks are stress-testing new lending at around 7% p.a.

What is an LVR?

An LVR is based on the size of a loan compared to the value of the property it’s used to purchase. For example, if the home you want to buy is worth $1 million, and you have a $300,000 deposit, then you’d require a $700,000 loan to purchase the property. This would mean 30% is coming from you, and 70% from the bank, which is an LVR of 70%.

If you want to borrow more than 80% of a home’s value, this is classed as a high LVR loan. And banks are currently restricted to lending no more than 20% of their owner-occupier lending to those with less than a 20% deposit.

While this doesn’t make getting a mortgage with a smaller deposit impossible, it makes it harder, as well as more expensive, because if you have a small deposit, you also usually have to pay some form of lenders’ mortgage insurance.

What is a DTI restriction?

DTIs came into force last July. The idea is to restrict borrowers’ access to huge, and unsustainable, mortgages, in case interest rates again hit abnormally low levels, as they did during the pandemic.

Borrowing over six times your income, gross tax but net any debts, is considered to be a high-DTI mortgage. And as with high LVR loans, banks can only grant a maximum of 20% of their mortgages to borrowers with DTI ratios over six.

Compare home loans with Canstar

If you’re in the process of securing finance, you must always shop around to get the best deal. Which is where Canstar can help.

The table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.

Compare home loan rates for free with Canstar!

How much can I borrow to buy a house?

As outlined above, there’s no set formula to determine exactly how much a person can borrow. But, as a general rule, you can borrow up to 80% of a property’s price. And if your finances are good, you may even be able to borrow up to 90%.

However, another general rule is that you shouldn’t pay more than around a third of your pre-tax household income on your mortgage, otherwise you’ll endure mortgage stress.

In case interest rates rise, your general living expenses increase, or your earning power decreases, it’s always recommended to have some wiggle-room in your budget.

So we’ve crunched the numbers on the maximum you could borrow to avoid the risk of mortgage stress on a set of different household incomes.

For our calculations, we’ve used the average two-year fixed rate on Canstar’s database, and also the approximate stress-test rate of 7% that the banks are using. Note that $135,000 is the average gross household income according to Stats NZ’s latest figures.

(Source: www.canstar.co.nz – 01/04/2025. Monthly repayments assume principal & interest repayments for the fixed rate over a total loan term of 25 years.)

However, it’s worth remembering that the above figures are very general, and don’t take into consideration the many variables that can affect your borrowing power.

If you want a more personalised estimate of how much you could borrow, check out Canstar’s free Home Loan Borrowing Power Calculator. It will show you what a financial institution may lend you, based on your income and expenses. Or to start comparing home loans, just click the link below:

Compare home loan rates for free with Canstar!

About the author of this page

Bruce Pitchers is Canstar NZ’s Content Manager. An experienced finance reporter, he has three decades’ experience as a journalist and has worked for major media companies in Australia, the UK and NZ, including ACP, Are Media, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. As a freelancer, he has worked for The Australian Financial Review, the NZ Financial Markets Authority and major banks and investment companies on both sides of the Tasman.
In his role at Canstar, he has been a regular commentator in the NZ media, including on the Driven, Stuff and One Roof websites, the NZ Herald, Radio NZ, and Newstalk ZB.
Away from Canstar, Bruce creates puzzles for magazines and newspapers, including Woman’s Day and New Idea. He is also the co-author of the murder-mystery puzzle book 5 Minute Murder.