New Zealand Mortgage Guide

Summary: A comprehensive guide to the types of mortgage available and how to go about getting a mortgage in New Zealand

Whether you’re interested in buying an investment property in New Zealand, a holiday home or you’re thinking about emigrating and want to finance the new family home, there are many mortgage options available to you because mortgage lenders, banks and finance houses in New Zealand are in plentiful supply and all are keen to lend.

This is the New Zealand mortgage guide from ShelterOffshore – it features the types of mortgage available in New Zealand, who’s eligible to borrow and how much they can finance, the type of property that can be bought by non-residents and foreign immigrants and a contact for an excellent property and mortgage finder service.

Who Can Borrow to Buy Property in New Zealand?

You can borrow money to buy property in New Zealand whether you’re a resident, a citizen, a non-resident, a temporary resident or if you’ve never been to New Zealand and have no intentions of ever going there!

Basically the mortgage market in New Zealand is incredibly mature as is the property market - and both benefit from clarity of transaction and transparency of process and are back up by a solid legal system that protects all parties involved in a property transaction.

Your residence status will have some bearing on what you can buy and how much you can borrow however…as will your financial status.

What Type of Property Can I Buy?

If you emigrate to live in New Zealand and achieve permanent residence status you will be treated in exactly the same way as a native New Zealander in terms of the property you can buy, the amount you can borrow and your overall rights of property ownership.  I.e., in theory you will be able to buy any property or parcel of land in New Zealand that is available for sale.

If you are in New Zealand temporarily on a work or visit visa for example, or you’re a citizen of another country and are buying simply for investment or holiday home purposes then you are currently restricted to the purchase of real estate on less than 12.5 acres of land, alternatively you can buy up to 12.5 acres of undeveloped land unless the land is in the vicinity of a protected area such as a national park or it’s on an island for example and then you can only own 1 acre.

How Much Can I Borrow?

The amount of money you can borrow from a mortgage lender to aid your purchase depends on many factors – generally speaking a lender will lend up to 95% to a resident or citizen in New Zealand (although some will lend up to 100% and in certain cases 100% + mortgages have been achieved) and if you’re non-resident then you can borrow typically between 50 and 80% of the purchase price.  However, the amount you personally can borrow depends on many more factors than just your state of residency…your personal income and that of your spouse counts towards what you can borrow, the stability of your employment situation, your age and whether or not you have any other significant outgoings or debts all have a direct bearing on what a bank will or will not lend to you.

It’s fair to say that the simpler a case you represent to a bank the easier it will be to get finance – so if you and your spouse are relatively young, have no major outgoings and are in secure full time employment you may well be able to borrow up to 5 times joint income at a decent interest rate.  If on the other hand you have been bankrupt, are self employed and have major credit card debt to pay off you’ll have to work hard to find an attractive mortgage deal.

What Types of Mortgage Exist in New Zealand?

In New Zealand borrowers have the option of taking out a table mortgage, a revolving credit mortgage, a reducing mortgage or an interest only mortgage…

Table - most buyers in New Zealand choose this type of mortgage, it requires that the buyer pays back a fixed monthly amount for the duration of the loan (the amount will fluctuate a little if buyers don’t fix their interest rate) and in the early years most money repaid goes towards interest payments but as the period of the loan goes on more and more gets paid of the capital lump sum borrowed.

Revolving Credit - this is like having a giant overdraft and it suits those who want to pay back their mortgage fast.  Your entire wage and any lump sums you want to make go into your mortgage account and wipe out the equivalent amount of debt, you can then pay bills and withdraw money from the account up to the limit of the mortgage – good lenders squeeze down the limit available to enforce repayment of the mortgage within a fixed time limit – even so, this type of mortgage is really only suitable for those who are strictly ordered with their finances!

Reducing - few reducing mortgages are taken out as they require higher initial payments and this puts too much strain and burden on most people.  Basically you make straight repayments of the capital borrowed and reducing amounts of interest so the mortgage starts high and gradually reduces – this is usually just what someone who’s taken on a new home doesn’t want!

Interest Only - This is a good option for a few years for many people who want to keep mortgage payments as low as possible to get themselves in a strong financial position – but really they should only be taken out with a savings policy which you save into to pay off the principal debt at the end of the mortgage term.

Who Can Help Me Get a Mortgage in New Zealand?

As your personal circumstances are unique our New Zealand mortgage guide can only ever give you an introduction to the general options available to you…however, if you would like personal advice, assistance or guidance to help find a property and get a mortgage in New Zealand please and we will put you in touch with James Wittering who provides an excellent and independent free, no obligation New Zealand mortgage and property finder service.

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