01 — Deposits
How much deposit do you actually need?
Twenty per cent is the number everyone quotes. It is a benchmark
rather than a rule, and plenty of people buy with less.
What changes below 20% is the cost and the scrutiny. Lenders
generally add a low-equity margin or fee, which sits on top of your
rate for as long as your equity stays under the threshold, and they
look harder at income and account conduct. Some lending is set aside
for buyers with smaller deposits, so timing matters as much as the
percentage.
A few things change the picture:
- New builds are often treated differently from existing homes, and
can need a smaller deposit.
- A KiwiSaver first-home withdrawal and the money you have saved
are usually counted together.
- Gifted deposits are accepted by most lenders, but they will want
it documented properly.
Rather than saving to a number you read online, get your position
checked against what lenders are actually doing this month. It is a
short conversation.
02 — Fixed or floating
Fixed, floating, or a bit of both
Fixing buys certainty: your rate and your repayment stay put for the
term you choose. Floating buys flexibility: the rate moves, but you
can make lump-sum repayments or pay the loan off without a break
cost.
The trade-off is the break cost. If you fix and then need out early
— because you sell, refinance or want to repay a large
amount — the lender can charge to unwind it, and on a long
fixed term that figure can be substantial.
Splitting the loan
Most people do not have to choose. Splitting a loan across two or
three portions with different end dates means only part of your
lending comes up for renewal at once, and a floating portion gives
you somewhere to put extra repayments.
What actually decides it is your next few years, not the rate sheet:
whether you expect a lump sum, whether you might sell, and how much a
change in repayment would hurt. Those are the questions worth
answering before you pick a term.
03 — What lenders check
What a lender checks before they say yes
An application is assessed on four things. Knowing which one is weak
is usually the difference between a fast approval and a decline.
- Servicing
- Can you afford the repayments if rates rise? Lenders test your
income against a rate well above the one you would actually pay,
and they include your other commitments — personal loans,
buy now pay later, and the limit on your credit card rather than
the balance.
- Deposit or equity
- How much of the purchase you are funding yourself, and where it
came from.
- Credit history
- Defaults and arrears matter, but so does the number of recent
credit enquiries. Applying at several lenders at once leaves a mark
on your file.
- Account conduct
- Usually three months of statements from the account your income
is paid into. Unarranged overdrafts, dishonoured payments and
heavy gambling transactions all get noticed.
Three of those four can be improved in a few months. If the numbers
do not work yet, the useful answer is which one to fix and roughly
how long it takes — not another enquiry on your credit file.
04 — Refinancing
When refinancing is worth the break fee
Moving lenders mid-term is not free. Breaking a fixed rate carries a
cost, and the new lender will want a fresh application. Sometimes it
still stacks up.
It is usually worth running the numbers when:
- There is a real gap between your rate and what is available, with
enough of your term left for the saving to outweigh the break
cost.
- You need a different structure — splitting the loan,
adding a revolving portion, or changing the term.
- You want to release equity for a renovation or a deposit on
another property.
- You are consolidating higher-rate debt into the mortgage, and
you will not simply rebuild it.
It is usually not worth it for a small rate difference late in a
fixed term, or if your income or credit position has weakened since
you last applied — a fresh enquiry and a decline elsewhere leave you
worse off than the rate you already have.
Ask your current lender for the break cost in writing. It is a
specific figure on a specific day, and everything else is guesswork
until you have it.
