Mortgage Archives - Mortgage Advisers - Mortgage Lab

Welcome to our First Home Buyers Questions and Answers session.

Have you ever been to a seminar hoping for lots of useful information and walked away not knowing anything new? What a waste of time! Our Q&A session means you get answers to all the questions you have.

Our Panel includes:

There will be no sales talk; nothing to buy; nothing to sign up to on the night. This is an information night so you can get all your questions answered.

Some topics we’ll most likely cover:

Feel free to come with as many questions as you like. You should leave the session comfortable to move forward with the house buying process.

Doors open at 6pm and we will get questions started at 6:15pm. Parking is available in all Financial Design carparks outside. Come along early to grab some nibbles.

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Article updated: 16th July 2018

Have you heard about KiwiBuild?  Jacinda Ardern’s Labour government is promoting it’s programme to build 100,000 affordable homes and apartments over the next 10 years.  Here’s what we know so far and our predictions for the KiwiBuild programme.

How to register your interest for KiwiBuild

After checking your eligibility for KiwiBuild, you can complete the form here to register your interest in the KiwiBuild.  There are only a few questions.

Of the 100,000 KiwiBuild dwellings, 50% will be in the Auckland area with the remainder spread throughout the country.  This seems reasonable as the main demand pressure has historically been on Auckland. The government has indicated it will achieve this 100,000 target by utilising crown-owned land and purchasing new homes / apartments directly from developers.  This will be similar to their acquisition of State Housing that has gone on for decades now.  Developers will most likely get priority treatment for the consent process if they agree to selling a percentage of their development at an “affordable” rate. 

What price are the houses going to sell for?

The current indication is that houses will sell for stepped prices in Auckland and Queenstown:

Anywhere else in the country will have a maximum price cap of $500,000.

The now closed SHA Scheme also allowed priority council consent if 10% of any development met the affordable criteria.  In this case, the level determined as affordable was a complicated calculation of the median sales in the area which often ended up as a bizarre number like $541,811.  And it was continuously changing.  It’s great to see the government is going with an easy to remember, round numbers figure this time.

What about income levels?  Do I earn too much?

The maximum income one person can earn is $120,000.  For a couple (or more) the eligibility criteria states $180,000.  We are assuming this will be measured in the same way as the HomeStart Grant.  That is, the previous 12 months must total less than $180,000 (or $120,000).  This is an important distinction from normal applications that take just the current salary.  An applicant could have recently had a raise that pushes them over the limit but because they have earned less than that in the past 12 months, they will still meet the criteria for a limited time.

What other restrictions does KiwiBuild have?

The rules for on-selling the property are looking to tighten.  Currently, to use your KiwiSaver, you just have to commit to living in the property for 6 months.  Until recently, no one was even checking this although lately a dozen or so people have been found to be living elsewhere and received penalties for this.  

With the new KiwiBuild programme, purchasers (or rather, ballot winners) will need to apply to the government in order to sell the property in less than 3 years.  It’s likely the government will only allow this in serious financial cases and will probably take the equity you have made.  In my opinion, this is a great way to tackle the issue.  It’s easy to monitor, and doesn’t force people to continue living in the house under duress as long as they are prepared to walk away from any capital gains.

I think the main problem is going to be finding 100,000 houses in the next 10 years.  Not just finding the land but also finding developers that are prepared to sell part of their project for, what could easily be, below the cost to build.  

Let’s look at the 50,000 new affordable houses and apartments in Auckland.  And let’s imagine every single (!) developer opted to sell 10% of their development under the KiwiBuild programme.  That would mean we need 500,000 new houses and apartments to be built in Auckland in the next 10 years (or 50,000 new dwellings in Auckland per year).  The current all time high for nationwide consents is 40,000 in 1967… Nationwide!  It just doesn’t seem likely that Auckland is suddenly going to go from approximately 9,000 consents in 2016 to 50,000 consents in 2019. 

You can read the Statistics New Zealand report here.

Maybe it’s a stretch goal; which is fine by the way.  And any attempt to get first home buyers into affordable homes is a great goal.  Other feedback from property industry professionals has questioned the ability to find the labour required to complete the KiwiBuild programme.  

At the end of the day, we hope the government can achieve this goal, maybe through some amazing change in council efficiency and vigorous training towards labour.  We’ll certainly be looking forward to helping 100,000 families into new affordable homes!

Now what?

When the ballot opens, you’ll want to have finance approved.  Under the previous Affordable Homes Scheme, pre-approval was a requirement to enter the ballot and we don’t see this programme being any different.

  1. Check your eligibility for KiwiBuild Scheme
  2. Enter your details into the registration form here
  3. Begin the process of getting pre-approved for a mortgage


In recent years, the Reserve Bank of New Zealand has implemented a host of rules on the banks, particularly around mortgages.  These rules have several purposes.

Some of them, like the LVR restrictions, are to stop the bubble mania of 2008 from happening again.  The days of lending 100% (or more) on a property are gone and not returning any time soon.

Some of the new rules, like the Responsible Lending Code, should just always have been there.  They require a lender to be able to hand-on-heart say that they were acting responsibly in granting a loan to the client.  Banks are calculating a mortgage at 7.5% to allow for future interest rate rises.  They also assume a 25% vacancy on rental properties which allows for some vacancies and other costs like repairs and maintenance.

These changes most often come up when a mortgage application is in, what I like to call, the “grey zone”.  The clients is just on the edge of what the bank are comfortable with.  Some examples of these grey zone applications are:

At first glance, none of these criteria are dealbreakers but the banks can only take on a certain number of these loans.  They also don’t want to be known for taking on grey zone loans.  If that happens, they end up holding a majority of those loans in the country which is obviously not preferred.

How do the banks decide who to give “grey zone” lending to?

Ask any Mortgage Adviser at the moment how to get a difficult application through the banks, they will answer the same way.  A bank is more willing to lend to an existing customer than bring on a new customer.  They have a lot more information on an existing customer and they are much more able to make informed decisions.

I have accounts with lots of banks.  What constitutes an existing bank customer?

Banks count themselves as “your main bank” if your salary goes into one of their accounts.  I know most of you have just seen a workaround but unfortunately this needs to have been happening for at least 3 months (sometimes 6 months).  Don’t think you can change your salary payment tonight and be an existing client tomorrow.

Couples should use separate banks

It’s therefore a good strategy to have couples, who are looking to buy in the future, put their salary into different banks.  You can still have a joint account but my suggestion is that you put your salaries into completely different banks and then transfer the money into the one account.  Maybe put your personal spending through the different banks to really show that you are an existing customer.

With this strategy, you’ve now got 2 banks who think of you as an existing customer and are likely to be a little more lenient on you if you have to push the limits of their lending policy.  A Mortgage Adviser will still be able to tell you which bank is better to approach first.  Either way, with this strategy, you’ve doubled your odds of a successful outcome.


Well, the news is in and we now know a lot more about the eligibility for KiwiBuild.

Income Caps

The maximum income one person can earn is $120,000.  For a couple (or more) the eligibility criteria states $180,000.  We are assuming this will be measured in the same way as the HomeStart Grant.  That is, the previous 12 months must total less than $180,000 (or $120,000).  This is an important distinction.  An applicant could have recently had a raise that pushes them over the limit but because they have earned less than that in the past 12 months, they will still meet the criteria for a limited time.

Owner-Occupied Home

The purchaser must live in the house and “intend to live there for 3 years”.  We can see the wording for this clause being changed to make it more restrictive.  Of course, everyone will say they “intend” to live there.  Potentially, a loss of capital gains would ensure that people didn’t take advantage of this.

Price Caps

If you live in Auckland or Queenstown, there is 3 levels of pricing for houses.

Anywhere else in the country will have a maximum price cap of $500,000.

How to register your interest

After checking your eligibility for KiwiBuild, you can complete the form here to register your interest in the KiwiBuild.  There are only a few questions.

Now what?

When the ballot opens, you’ll want to have finance approved.  Under the previous Affordable Homes Scheme, pre-approval was a requirement to enter the ballot and we don’t see this programme being any different.

  1. Check your eligibility for KiwiBuild Scheme
  2. Enter your details into the registration form here
  3. Begin the process of getting pre-approved for a mortgage

Our thoughts

The government has come up with some interesting solutions to the original problems that KiwiBuild faced.  It has tackled the worker shortage by investigating a migrant visa related to skills in the construction industry and seems to be looking solidly at the prefab construction market to supply the houses.

We remain skeptical regarding the possibility of being able to process the increased number of consents.  One solution to this has been for the government to complete the consents “in-house” taking the pressure off the councils.  This is undeniably a terrible idea.  Although Councils can be slow, they still have the best knowledge on consent processes which are in place for a reason.

At the end of the day, even if this is a stretch-goal and only, for example, 70,000 new houses are created, the first home buyer market will have significantly benefited from the endeavour.  It will also have served to get the pre-fabrication industry more established which will help construction long-term.

Apartments are a very tempting purchase, especially for first home buyers.  They tend to be lower cost and therefore much more within reach.  But there are a few things to be aware of:


If you’re looking to borrow up to 80% on an apartment, most banks prefer them to be at least 50sqm.  Two banks will allow as low as 40sqm and one bank will include the balcony in that size.  In general though, <50sqm is going to be more difficult.

Freehold apartments vs Leasehold apartments

A leasehold apartment buys the apartment but not the land.  You lease the land off another owner so there is always a “lease payment” in addition to the ownership.  This is what makes leasehold apartments appear to be so cheap.  You are buying a shell that dangles 5 or so stories in the air.  The problem is that the lease is eventually renewed and when it does, the cost can skyrocket.  In general, leasehold apartments are for the perpetual high-income, low-deposit buyer.  It would be fair to say banks much prefer freehold.

Body Corporate

The bank will need to know what the Body Corporate payments are and factor this into your budget.  Don’t be afraid of these costs.  You pay a Body Corporate to maintain the outside of your building and insure your property.  You were going to have to do this on a house too (replace the roof occasionally, paint the walls etc), it’s just that most people don’t put aside the money in the same way a Body Corporate does.

LVR Restrictions

Banks are generally against lending higher than 80% on an apartment.  This is because, if they have to sell the property from under you, there is often one or two identical apartments for sale which lowers the chance of them getting a good price.

Consider what this means for a first home buyer though.  You can often borrow up to 90% on a house but only 80% on an apartment.  This means, if you have $100,000 deposit (and plenty of income), you could buy a $1,000,000 home but only a $500,000 apartment.  While an apartment is cheaper (try finding a $500,000 home in Auckland!) your buying power is considerably less.


Believe it or not, I’m a fan of apartments.  I am a particularly hopeless DIYer and the maintenance that a Body Corporate provides suits me.  They are great if security is a concern and often have other cost-saving benefits like a gym in the building.  They are not for everyone though and if you are looking for an apartment, run a few examples past your mortgage adviser first to get an idea of what the banks think.




Order your Credit Report

It’s free to order your own Credit Report and is a great insight into what the bank will know about you. See what loans are recorded against your name. See what the Utility Companies say about you (if you’re late paying the Electricity company, they now note this on your Credit Report and the bank hates it).

But most importantly, see if there are any defaults marked against your name and, if they are incorrect, start the process to get it corrected. This is a long and tiring process so it’s better to know 3-4 months before you want to apply for a mortgage.

You can check your credit report at or

Find out when you’re eligible to withdraw your KiwiSaver

You need to have been contributing to a KiwiSaver for 3 years before you can withdraw it for your first home. Note the word: “contributing”. Give your KiwiSaver provider a call to see if and when you are eligible.

Take a look at the First Home Buyers Club summary of KiwiSaver Withdrawal For First Home

Ask your boss for a pay rise

Hey, why not? An additional $3,000 per year could get you a house worth $50,000 more. That can make quite a difference in some areas and could be the difference between getting your dream house or missing out on it.

Take a look at these 5 Tips For Getting A Pay Rise

Remember, when it comes to talking to a Mortgage Adviser, there is no such thing as “too early”. We prefer to get you on the right path now so when it comes to applying for finance, it all goes nice and smoothly.

It’s that time of the year when the Reserve Bank releases all it’s statistics on current and new mortgages.  The statistics are broken down into new lending, existing lending, interest only and principal and interest payments.

Some highlights from the release are:

Interest Only reduction

The Reserve Bank has previously indicated that they would like the banks to reduce the amount of mortgages on Interest Only even further.  As a result of this, a number of banks have implemented strong measures to ensure that clients aren’t perpetually keeping their mortgages on interest only loans.

And this is a good thing.  It is not a good strategy to keep your mortgage on Interest Only indefinitely.  If interest rates increase, you are liable for significantly higher payments.  The more you pay off your mortgage, the less risk you have with increasing interest rates.

Interest Only and Property Investors

But property investors who are already making additional payments on their personal mortgages are not being allowed to keep their investment mortgages on Interest Only.

Mortgage Tip: It’s a standard financial strategy to keep all your investment mortgages on Interest Only while you pour your money into paying down your personal mortgage.  Only once you have paid off the personal mortgage, you begin to pay down the investment portion.

But banks are declining Interest Only extensions even for clients who are making large payments to their mortgage.  Most New Zealand banks now limit an Interest Only term to a maximum of 5 years before the client is required to begin paying down their mortgage.  However, it’s this kind of one-size-fits-all policy that is costing investment clients by reducing their tax liability.

There are banks, for example, that are simply refusing to extend Interest Only periods for any clients with over 70% LVR (Loan to Value Ratio).  As a result, we have clients who are now having to divert their personal mortgage payments to pay down their investment mortgage.  It still results in the mortgage being paid in the same amount of time but has severely disadvantaged the client from a tax perspective.

The war on property

In the past 10 years, property investors have had several advantages taken away from them that previously made property more lucrative.  The removal of claimable depreciation in Budget 2010 followed by the introduction of the bright-line test in 2015 which applied a capital gains tax to properties bought and sold in less than 2 years.  The bill ( to extend the bright-line test from 2 years to 5 years has passed it’s third reading and will become law.

Since 2013, property investors have only been able to borrow up to 60% LVR on investments properties with this being lifted to 65% in January 2018.

Interest Only is different

The previous policies were designed to cool an extremely hot property market and, to a large extent, this has been successful.  The LVR rules, for example, were put in place to limit the investors that were crowding out the first home buyers.  But these Interest Only policies that force investment property owners into a disadvantaged tax situation benefit no one.  They were paying down their mortgage and staying within the rules with their tax deductions.  Why are they being targeted?

It seems that the banks are turning a blind eye to situations where clients are paying their personal mortgage because it would be too hard to monitor.

But realistically, it would take a very simple assessment: are the proposed Principal payments going to pay down the entire mortgage in 30 years or less (for a new mortgage)?  If so, the clients should be able to place any mortgage up to the maximum value of their investment properties on Interest Only.

The solution

It could be time to change banks if you are quickly paying down your personal mortgage but your investment mortgage is not being extended by your bank.   A new bank should allow you to reset that 5 year stopwatch and place the investment mortgage on Interest Only again.  There are some important caveats to this:

Held weekly – Monday, Wednesday and Saturday –

You’re looking to buy a home.  Or perhaps you’re looking for your next investment property.  Have you considered buying a brand new house?  What are the pros and cons of dealing with a new construction?  What are the rules around KiwiSaver?

In our 30 minute free webinar, we lay out the basics for you.  By the end of the webinar, you should be clear on:

As with all our webinars, there is no sales pressure and nothing to buy.  Just information that puts you in a better position to move forward.

Our webinars run every week on:


Tuesday 22nd May – 5:30pm (Seminar begins 6pm) –

Not sure where to start with your first home purchase? What do you need to prepare? Are you unsure how much you need for a deposit? Or how the HomeStart Grant works?

Join us for our 1 hour seminar with CEO of The Mortgage Lab and author of “The Successful First Home Buyers Guide“, Rupert Gough.

It doesn’t matter if you are about to purchase your first home or you are going to purchase in the next few years. This is the seminar to get you ready.

This seminar will include:

There will also be an opportunity for questions at the end.

Doors open at 5:30pm. The seminar will start at 6pm and take an hour or so with plenty of opportunity to ask questions at the end. Parking is available at Smales Farm.

Note: we will not be selling any products and there is no sales talk. This is an information evening to educate first home buyers through their purchase. We have 2 ticket options – a completely free ticket or a donation to our favourite charity – the “I Have A Dream” Charitable Trust.

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Maybe you’re in Auckland with your deposit ready to go for a house.  Or maybe you’re looking to purchase your next investment property.  For fun, we scoped out TradeMe to see what a million dollars buys you at the moment.  The difference is… vast.


It will come as little surprise to you that a million dollars doesn’t buy you a whole lot.  For our largest city, you can get this 125sqm, 2 bedroom home in Point Chev.  The section is 347sqm.


You get a little more bang for your million bucks in Tauranga.  The section is a little bigger at 481sqm, the floor area is almost double the size at 240sqm.  It has 4 bedrooms and is brand new.


At about the same floor size, a million dollars gets you a Tauranga comparable.  This house is 190sqm and on a slightly larger 533sqm of land.  It has 3 bedrooms, which is less than the Tauranga house but it also has what Wellington excels at… views.



As we move further down the country, a million dollars takes on a whole new meaning.  Scroll up, look at that Auckland house again.  Now realise that the same amount of money buys you an 898sqm section and this castle.  The ad doesn’t say what the floor area is, but it has enough parking for 6 cars and the photos show enough living-room area to swing a cat.
(Additional note, Mortgage Lab does not condone cat swinging)


A million dollars buys you not one, not two but three flats in this very large property in Dunedin.  With a total floor area of 390sqm, it is over 3 times the size of the Auckland property.  The ad also tells of about a 10% return which I would also guess is about 3 times the Auckland property.  Whether the long-run capital gains could match or even come near Auckland is the reason some will choose this villa and some will choose one of the others above.

A long-term hold

Speaking of capital gains, we thought it would be fun to see what we could have bought with a million dollars 100 years ago.  It’s hard to find good property details but we did find the Statistics Yearbook from 1918 here.  In 1918, you could have bought: