Disclaimer:
The information on this website is for general guidance only and does not constitute financial or investment advice. Always do your own research and seek personalised advice from a qualified financial adviser or mortgage adviser before making financial decisions. All investments carry risk and past performance is not indicative of future results.
Key Takeaways
- Student loan repayments reduce your net income for servicing.
- Loan size matters less than the repayment percentage.
- Income and deposit hurdles are assessed separately.
- Stable spending and income improve affordability outcomes.
- Mortgage advisers can help explain how lenders may treat student loans and compare the available options.
First Home Buyers are often nervous about the size of their Student Loan and how it will affect their chance of getting a mortgage.
The Scenario
You've studied hard for many years and, to get there, you borrowed on your Student Loan for courses, books, and some money to live on. Now you have a deposit for a house … and a Student Loan of four times that! How is your Student Loan going to affect your chances of getting a mortgage?
Home Loan Affordability
When applying for a bank mortgage, people usually face one of two hurdles:
- Income Hurdle: You don't have enough income to cover all expenses
- Deposit Hurdle: You don't have enough deposit
TIP: Talk to your Mortgage Adviser to find out any potential hurdles you might face when applying for a mortgage. By understanding your personal circumstances, they will also be able to advise you on strategies to meet the bank's home loan affordability equation.
The Income Hurdle
When banks calculate how much you can afford, they will deduct your monthly Student Loan repayment from your monthly income.
Student loans reduce your income because you need to start making repayments to IRD once you earn over the repayment threshold. For the current threshold checked on 7 July 2026, repayments start once income is over $24,128 a year before tax, or $464 a week before tax. For salary and wage earners, IRD says repayments are generally 12% of every dollar earned over the repayment threshold.
The Good News:
It actually doesn't matter to the banks how large your Student Loan is. The bank's affordability calculation will be the same whether you have $3,000 or $300,000 remaining. Why? For New Zealand-based salary and wage earners, the regular repayment is based on income over the threshold, not simply the total loan balance. Different rules can apply if you are overseas-based, self-employed, behind on repayments, or making extra repayments. A New Zealand-based borrower is generally interest-free, but overseas status, late payments, or special circumstances can change obligations.
However, they would care if you had a $300,000 credit card debt (obviously), but not a Student Loan.
Do not be embarrassed about the size of your student loan. Many lenders focus mainly on the regular student-loan repayment when assessing affordability, but exact treatment depends on lender policy and the wider application.
TIP: If only a small student-loan balance remains, ask your adviser or lender whether paying it off would materially change assessed affordability before using deposit funds to clear it.
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Reducing Debt
Consider your current financial situation and whether you have other debts or expenses that require immediate attention. If you have high-interest debt, such as credit card balances or personal loans, compare the impact of repaying high-interest debt, student-loan balances, and preserving deposit funds before deciding.
High-interest debt can affect cashflow and affordability, so it is worth understanding how each debt affects your budget and mortgage assessment before deciding what to repay first.
Savings and Investment Goals
Depending on your individual circumstances and priorities, here are some key considerations:
- Balancing student-loan repayment and investing: Investment decisions depend on timeframe, risk tolerance, cashflow, and first-home plans. Treat this as a discussion point for an adviser rather than a fixed rule.
- KiwiSaver and employer contributions: KiwiSaver decisions depend on your contribution settings, first-home timing, withdrawal eligibility, cashflow, and advice needs. Check the rules before changing contributions.
- Emergency fund: A cash buffer can help with unexpected expenses or job changes, but the right amount depends on income stability, household costs, and first-home timing.
- Seek Professional Advice: Personal finance is a complex matter, and it's often beneficial to consult a financial advisor or planner. They can provide personalised guidance based on your unique financial situation, goals, and risk tolerance.
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Frequently Asked Questions
Need personalised guidance?
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Have a question about this?
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