How Much Can I Borrow For My First Home?
For many first-time buyers in New Zealand, the most pressing question isn’t just where to buy — it’s how much you can actually borrow. Knowing your borrowing capacity helps shape everything from your property search to your budget planning and offer strategy.
Lenders take a cautious approach when it comes to assessing affordability. The amount you can borrow is not just based on your income and savings but also on your existing financial and future commitments, lifestyle expenses, and even the type of property you intend to buy. In this article, we’ll unpack how borrowing limits are calculated, what banks look for, and what you can do to strengthen your position as a first home buyer.
What Do Banks Look At When Deciding How Much You Can Borrow?
When applying for a home loan, banks and lenders conduct a full assessment of your financial situation to determine how much you can afford to repay on a monthly basis without financial hardship. This is known as your serviceability.
Here are the core elements lenders assess:
Income
Your income is the foundation of your borrowing power. Lenders will review your:
Gross annual salary or wages
Self-employed income (usually averaged over 2 years)
Secondary income (bonuses, overtime, boarder or flatmate income, benefits)
Rental income (if you’re keeping a current property as an investment)
For variable income sources such as commission or overtime, lenders may only use a percentage of that amount or average it over time.
Expenses
Banks consider fixed living expenses as non-discretionary (unable to be adjusted) and discretionary expenses (able to be reduced or stopped if required). They’ll want to see:
Regular outgoing expenses (utilities, groceries, transport, subscriptions)
Debt repayments (credit cards, car loans, student loans, Buy Now Pay Later services)
KiwiSaver and investment contributions
School fees or childcare costs, if relevant
Banks will compare your income to your expenses to see what monthly surplus you have available to service a mortgage. An in-depth discussion with your mortgage adviser or lender will help to confirm these expenses.
Tip: It is important to accurately reflect what your future home ownership expenses will be to avoid becoming financially stretched if your future expenses are underestimated.
Deposit Size
The size of your deposit plays a major role in how much you can borrow. The bigger your deposit, the lower the loan amount needed and the stronger your application.
In New Zealand, the standard deposit required for most buyers is:
20% for an existing property
10% (or even 5%) for eligible first home buyers using First Home Loans or purchasing a new build
For example, if you have a $100,000 deposit and want to borrow 80%, the maximum purchase price would be around $500,000.
Learn more about deposit strategies and savings options in our blog How much Deposit do I need as a First Home Buyer?
Debt-to-Income Ratio (DTI)
Banks are required by the Reserve Bank to apply a Debt-to-Income (DTI) limit, especially in higher lending situations. This is the total amount of your home loan compared to your gross annual income. Lenders use a DTI limit for owner-occupied properties of 6 times your income. So, if your combined income is $100,000, you may be limited to a loan of $600,000.
Stress Testing at Higher Interest Rates
Banks don’t assess your affordability based on current interest rates. Instead, they "stress test" your loan at a higher interest rate—often around 2% higher than current interest rates — to ensure you could continue repayments if rates rise in the future. This can significantly affect how much you can borrow.
Even if you're applying for a fixed interest rate of 6%, your application might be assessed as if you’re paying much more. This is one of the most common surprises for first home buyers.
Get An Estimate Of Your Borrowing Power
To get a quick idea of what you might be able to borrow, get in touch with us, and we can give you feedback on your home loan affordability.
Book A Chat With Our First Home Buyer Adviser
Whether you’re wondering how much you can afford, what deposit you need, or how to get bank-ready, we’ve here to help.
Let’s get started with a free, no-obligation chat.
How to Increase Your Borrowing Power
If your borrowing power isn’t quite where it needs to be, there are ways to strengthen your application.
Reduce Debt
Paying off or consolidating credit cards, Afterpay accounts, or car loans can dramatically improve your serviceability. Even if you have a credit card with no balance, the limit is still counted as potential debt by most banks.
LEARN MORE: 6 Tips For Getting On Top Of A Debt Mountain
Increase Income
While easier said than done, picking up overtime or securing a second source of income (such as taking in a flatmate) can help. Some banks accept boarder income up to $250–$300 per week, especially if you’re currently living with flatmates.
Teaming up with a family member can be another option if appropriate. Just be sure to consider the suitability of your team and take a read of our article on Buying Property With Others: Things To Be Aware Of
Trim Expenses
Review your bank statements and see where you can make savings. Many lenders will ask for the last 3 months of transaction history and will flag high discretionary spending, multiple subscriptions, or irregular transfers.
Discussing a realistic future homeownership budget with your adviser or lender can assist in this area and ensure you have adequately factored in what your homeownership expenses will look like to avoid being financially stretched.
Use a Guarantor or Gifted Deposit
Having a family member gift you part of the deposit, or act as a guarantor, can reduce the loan amount required and improve your chances of approval. Both banks will consider this option. It is, however important that all parties obtain independent legal advice to understand their obligations.
Apply Through a First Home Loan Scheme
If you’re eligible, applying through a lender that offers the First Home Loan scheme backed by Kāinga Ora can allow you to borrow with as little as a 5% deposit—subject to income and regional price caps.
How Much Can You Borrow On One Income vs Two?
Single applicants often feel they are at a disadvantage — and in some ways, they are. With one income, your borrowing power will naturally be lower, and expenses like rent, utilities, and groceries don’t reduce as much as income does.
That said, many lenders support single buyers through lower-deposit options and by factoring in flatmate income. If you’re buying as a couple, your joint income and combined expenses will generally improve your borrowing power.
For those planning to have children or reduce hours in future, it's important to assess whether your loan is sustainable on a single income if required.
For single applicants, considering teaming up with friends or family could help you overcome the income hurdle to get into your first home.
LEARN MORE: Buying Property With Others: Things To Be Aware Of
What Happens If You’re Self-Employed?
If you're self-employed, you’ll need to provide more documentation to support your income, usually including:
2 years of financial statements
Personal IRD income summaries
Business bank statements
GST returns (if applicable)
Some lenders may accept just one year of financials if you’ve switched from employment to contracting within the same industry.
A mortgage adviser can help package your application to highlight your earnings potential and stability, especially if your income varies across seasons or projects.
Can You Get Pre-Approved Before Knowing How Much You Can Borrow?
Yes. In fact, getting a mortgage pre-approval is the most reliable way to know exactly how much you can borrow.
Pre-approvals give you a conditional lending amount, usually valid for 60–90 days. This allows you to search for a home with confidence, make offers quickly, and meet finance conditions within tight deadlines.
It also means that any potential issues with your application—like undisclosed debt, high expenses, or issues with your income—can be addressed early before you fall in love with a property outside your budget.
You can learn more in our guide: 7 Steps to Get Mortgage-Ready for Your First Home
Work with a Mortgage Adviser to Maximise Borrowing Power
Banks differ significantly in how they assess applications. One bank may decline your loan due to a credit card or expense level, while another may approve it thanks to more flexible policies.
That’s where working with a mortgage adviser can be invaluable. At The First Home Buyers Club, our advisers:
Help you understand and guide you through the first home buying process.
Compare lending criteria across banks
Help you understand your borrowing limits
Suggest ways to increase affordability
Structure your application for better success
Our service is free for most clients, and you’ll get expert support from someone who understands the New Zealand property market and the first home buying process inside and out.
Ready to Get Started? Let’s Find Out What You Could Borrow
If you're wondering how much you can borrow for your first home, the best next step is to speak with a mortgage adviser and get a realistic assessment of your position. We’ll help you calculate your borrowing power, review your income and deposit, and explore what options are available through different lenders.
Even if you’re not quite ready to buy, understanding your limits now can help you plan, save, and set realistic goals for the future.
Get in touch with The First Home Buyers Club today to start your journey to homeownership. Visit our Home Loan Approval Planning page or take our Home Readiness Quiz below to get feedback on where you stand.
