The Bank Said No Because of My Income
It’s a moment every property investor dreads: the bank says no. You might have enough deposit. Your credit report might be squeaky clean. But according to the lender, your income isn’t high enough to support the mortgage.
This is known as hitting the income hurdle—one of the three standard checks banks apply to every mortgage application, along with the equity hurdle and credit hurdle. But don’t panic—there are often ways to address it, restructure, or approach the application differently.
Let’s break down what’s really going on behind the scenes when the bank calculates your borrowing power—and what you can do to improve your position.
Why the Bank Said No: Understanding the Income Hurdle
Banks use detailed (and conservative) formulas to test whether your income can safely support a mortgage. Every bank has slightly different rules, but here are some of the most common income considerations:
Mortgage repayments are tested at ~8.5% interest rates, not current rates
KiwiSaver contributions may be deducted from your usable income—even if you plan to stop them
Dependents (children) and cars add assumed monthly expenses
Credit card limits (not balances) reduce your usable income
Rental income is “shaded” by 25% to allow for vacancies, repairs, and costs
These policies mean your borrowing power can differ by over $150,000 from one bank to another. It’s not unusual for one lender to say no while another says yes. That’s why having a mortgage adviser in your corner makes a real difference.
What You Can Do If the Bank Declined Your Application Due to Income
If the numbers don’t stack up on paper, there are still steps you can take. Some are fast fixes, others may require a bit of planning—but all are worth exploring.
Reduce Unused Credit Card Limits
Even if you don’t carry a balance, unused credit limits lower your borrowing power. If you’ve got a $20,000 limit “just in case,” consider reducing it and getting confirmation from the bank before you reapply.
Get a Rental Appraisal
If you’re buying an investment property, make sure to supply a rental assessment from a property manager or real estate agent. The bank won’t take your word for it—and they’ll use the lowest figure in any range given.
Take in a Boarder or Flatmate
Banks usually allow up to $150–$200 per week for boarder income (maximum of two boarders). That could boost your income by up to $15,000 a year—enough to tip the scales in your favour.
Clear Small Student Loans or Hire Purchases
If you’re down to the last few payments on a student loan or hire purchase, paying them off may free up a meaningful chunk of income—as long as it doesn’t reduce your deposit too much.
Increase Rents on Existing Properties
If your existing rental properties are under market rates, consider a rent review. A modest increase—say, $20 per week—adds over $1,000 per year to your income and can make a difference to the bank’s calculation.
Sell a Vehicle
Some banks assign an automatic monthly expense for each car you own. If you’ve got a third or unused vehicle, selling it may slightly improve your servicing position.
Ask for a Raise
Even a small increase—say, $2 per hour—is the equivalent of $4,000 extra income per year (based on a 40-hour week). Don’t underestimate how impactful this can be.
Still Not Enough? Consider Non-Bank Lenders
If your servicing is still too tight for the main banks, some non-bank lenders offer mortgages based on the strength of the property asset—not your income.
What to Know:
Non-bank interest rates are higher (typically 10–18%)
Fees apply (2–3% including adviser fees)
You’ll need an exit plan—these lenders expect to be refinanced within 2–3 years
This route works best when you’ve found a great investment opportunity and expect your income to grow, the property to increase in value, or a renovation to improve your cashflow.
A Word on Friends as Co-Borrowers
It’s tempting to bring a friend on board to boost income, but this approach is rarely successful. Banks view “co-borrowers of convenience” as risky, especially if there’s no clear legal structure, shared ownership, or exit strategy.
Friendships can change. Circumstances shift. If your co-borrower wants to buy a house in two years, will you be able to buy them out? If not, the bank may simply decline the application.
What To Do Next
If you’ve been declined due to income, don’t be discouraged. It’s not always a reflection of your financial behaviour—it’s often just a quirk of how different banks interpret your numbers.
Here’s your next step:
Ask your broker how far off the mark you are
Tidy up the low-hanging fruit (credit cards, boarders, student loan)
Consider a short-term plan with a non-bank lender if needed
Have a strategy to refinance back to a main bank as soon as possible