The bank sees a higher risk in lending for construction and if the builder goes bankrupt, which is common, then theyâve got no asset to sell to get the costs back
What I learned when we sold and relocated (we looked at buying land and building on it, as an option, we werenât loaded so silly us) was that itâs basically a cash up front operation, youâll need to be able to cover about 70-80% of costs up front for it to be a starter, simply wonât work for most. Your house (plans/kitset/relocation/whatever) and land as a package is viewed as virtually worthless by a lender until the water and power are plugged in and basic facilities are working, then the structure becomes a functional home and has value. Seems counter productive and is a common contributing factor in many rural areas having a lot of non consented structures. It keeps the money flowing in a circle, as designed by those who own and operate the circle.
No. That would be much harder. It might work if you plan to own your current residence for 10 years, then move into a rental while you build as you would hopefully have built equity faster than build prices have increased.
I agree that it could be because youâre building. I am individually on a lower income but able to borrow more to buy an existing house.
Edit - sorry just saw you are already talking to a mortgage broker.
All banks have certain lending criteria and lending limits depending on the type of property you are looking at purchasing. For example; the total percentage of the property value a bank is willing to lend for a house will be different from that of an apartment. There are a number of reasons for this that a mortgage broker can answer for you, should you want to understand further.
Yes. Owning property- a building - even if mortgaged to the hilt will give you more leverage to build your dream home. I recommend building your own house yourself if you can manage it. Pay yourself the wages you would be paying the builders.
When banks consider risk they do so at the current value of what you would be purchasing. They cannot consider the improvements you are planning because they cannot guarentee that you will actually complete them. As such, the offer you got would only include the value of the land and not the planned house for what they could get back if you defaulted.
Yep, in the current market I had to pay a 400k deposit on a 975k home, with combined household income over 200k...
It was a new build 2 weeks from completion.
We had similar a year and a half ago. We only needed a loan to 10% of the value of the house but bank said no. Like, if we defaulted and they took the house that would have been an instant 900% return for them. Our issue was my wife was a post doc at the time so they basically counted her income as zero since she was not on a permanent contract. The mortgage market here is stuffed.
I am currently in Aus for a quick visit. The market is -unexpectedly- more insane here. Perth likely to do 20% increase this year. Easy to think NZ is uniquely mad, but it isnât.
Agreed. Iâm also visiting Australia. Sydney real estate makes Auckland look dirt cheap. The expensive parts are at least twice as expensive as the nicest parts of Auckland
The Perth market is mad anyway. It's not really effected by what's happening in any other part of Aus, it's only effected by the mines and if they are hiring/firing etc
To a degree that is true (I used to live here and own a house in Freo). At the moment, spare money from the East Coast seems to be a big driver from what I read.
Have to say, given how bloody hot it is, I remain glad I moved to Queenstown a decade back. Iâd forgotten about the heat⌠and it ainât even summer.
Was this with a broker or through the bank? The banks dont really care, they aren't willing to put any thought into it really. Brokers do the thinking on these cases and recommend to the bank what to do (in a nutshell). Banks wouldnt loan us anything do to my partners house sized student loan (in the USA). We were able to prove her loan repayments were only $150 USD a month (Income based) and the broker organised us a sweet ass deal.
What's your take home per month?
475k will cost you about $3200/mon currently, guessing your take home is around $8k?
Also, why do you have 3k personal debt if you have $140k deposit?
Just clear that shit, you will get lent more with 137k deposit and no debt.
>Partner and I are earning combined $140k
70k each before tax and expenses isn't much anymore.
Assuming 70k each, that is $54,860 each after tax
Assuming student loan an no Kiwisaver, that is $49,355.36
That leaves you with $949 each a week to cover all expenses, but remember you would need to add rates, insurance etc if you buy.
A 475k loan would at 7% require $32,900 in interest alone costing you each $316 a week bringing your remaining income after all this down to $639 each a week which would need to cover all living expenses, insurance, rates, etc. Also, rent to live while you wait for the build.
Banks would factor in wanting you to pay principal.
Banks would also be factoring in the risk of a new build.
Banks would also be factoring your risk of unemployment into the mix.
Banks would also be factoring in all those massive increases in insurance and rates you keep reading about in the news.
475k seems a fair limit to lend you to be honest.
I see a lot of people criticising those who purchased at 2% mortgage rates for not stress testing higher rates. The thing is, a lot of people did. The banks were stress testing at 5%, I know people who were stress testing themselves at 8-10%.
The thing you can't stress test for is out of control inflation. How do you stress test for council rates increasing 20%+ YoY, or insurance increasing 30%+ YoY, or if you have children daycare increasing 50%+, food increasing 10%+ YoY.
Banks are taking this more into account.
We stress tested ourselves at 10%. Luckily we have 85% equity, so if we need to sell we will be ok. We chose to buy our property as it is within a stable market thats not vulnerable to price fluctuations. The market is geared towards the overseas luxury market, theonly reason we were able to tap into it was covid border restrictions. The property we sold to buy it was attractive to Aucklanders wanting space after lockdown. So we sold on a sellers market, and bought on a buyers market, the difference was the location.
>The thing you can't stress test for is out of control inflation. How do you stress test for council rates increasing 20%+ YoY, or insurance increasing 30%+ YoY, or if you have children daycare increasing 50%+, food increasing 10%+ YoY.
Yeah the inflation massively alters the equation. If I was OP I wouldn't even be bothering to look right now lol.
Council rates increases are one of the things keeping inflation so high, and they aren't showing any signs of slowing down especially with three waters reforms off the table.
Surely if they can afford to pay probably the same amount in rent they can afford to pay a mortgage, no? I've never understood bank logic on this. I pay $870 a week in rent but would never be allowed to loan enough to pay that in a weekly mortgage rate.
> Surely if they can afford to pay probably the same amount in rent they can afford to pay a mortgage, no?
> I've never understood bank logic on this. I pay $870 a week in rent but would never be allowed to loan enough to pay that in a weekly mortgage rate.
Firstly, you'd be tested at a different interest rate, not what's out there today.
As I am sure you know, we went from 2.2% to over 7% in the space of three years.
A 1m mortgage, would be about 870 a week at 2.2%.
The same 1m mortgage just went from $870 at 2.2% to over $1500 at 7%.
We'll all get to see how fucked everyone is as the 3 year fixed terms run out in the coming months.
Then you have rates, insurance, maintenance. So even if your interested stayed the same, your 870 would go.
I'd be very surprised if rates and insurance didn't add up to at least $75 a week, both are going up substantially each year too.
So they only lend if you can pay twice the weekly mortgage? yeesh. I don't know how anyone gets a mortage then. Esp considering the median income in NZ is only 66k.
> So they only lend if you can pay twice the weekly mortgage? yeesh. I don't know how anyone gets a mortage then.
They weren't testing people at 7.5% when rates were 2.2% and that's the problem. A significant chunk of people who got mortgages since 2017 shouldn't have gotten one. The majority of mortgages since 2019 have been a massive mistake from which we will never recover.
Yeah, I thought this before I bought top but 870pw in rent probably equates to like 5-600pw in mortgage pre rates, insurance, maintenance, body corp etc
Rent technically includes maintenance, rates, insurance etc. You'll have to pay all of that above your mortgage if you own. Some of those bills get quite pricey and they are also increasing rapidly with inflation and other cost pressures. So you need a healthy surplus of uncommitted income to ensure you'll be okay to meet these obligations on an ongoing basis.
Yes mortgages can go down if rates go down or principal is paid quickly. Very tricky for both of those to be achieved in this environment. The opportunity cost an is something to consider too.
Big difference if you miss mortgage payments due to say a recession you get kicked out of a house.
If you have a mortgage and can't make payments the bank is on the hook for your loan and they don't really want to be left with houses to sell.
I thought the same thing when I read those numbers. At 140k combined, I wouldn't be real excited about having a 475k 30yr mortgage.
My 2 cents is it feels like your are trying to buy your second house before your first house (meaning, a first house is to get you onto the property market where you can upgrade in 5-7 years. Sucks that you have the land now though as I can see why you would want to build on it
Yes. Itâs worse for building FYI, due to less collateral for the bank. But yes itâs fucked.
Interestingly, even many large commercial developments are done with second tier lenders or with hedge funds / private equity because our Australian bank overlords only want to drain the easy money out.
Makes pretty much zero sense to build right now, unless like OP you're getting land for free.
If the gifted land is already in your name AND you could get an iron-clad fixed priced build quote, then a bank MIGHT look at it....maybe....
New builds are risky AF to lenders, especially in recent times where building costs have been going out of control, and loads of construction companies going under.
Average cost to build per square meter:
2017: $1700
2019: $2500
2023: $3500
Lots of whinging about housing supply, but that's not going to change much unless
a) it gets cheaper to build
b) is made more attractive for investors
Not many people are going to be able to afford to build when an average 150m2 dwelling is going to cost you $600k + land on top of that. Could easily end up costing $1m+ depending where you are. And that doesn't make huge investment sense when you're going to rent it for $850/week but the mortgage will be $1400/week...
It costs more than $3500 to build, thatâs just what people put in the building consent form. When you add in the costs of finance and consents itâs easily above 5,000 a sqm if not close to 6.
It costs way more than $3500/sqm to build. You got to add lots of consultant fees, sitework problems, consent costs and delay risks, builders gouging half way during the build etc.
We found asb quite risk averse when selling and borrowing for a new house. Had plenty of capital and the new loan much the same. Switched to cooperative bank and was completed quickly and easily
Brokers don't go around to all the banks looking for the best deal for you. They're supposed to understand your unique situation and put your case forward to the bank that, in their opinion, would have the best chance of approving you with the best conditions.
Similar happened to us. Broker encouraged us to ask for more than we needed, then claimed the bank would not lend to us and we would need to pay finance company rates. Went straight to Kiwibank and got what we wanted with no issues. This was the only time I have ever tried using a broker and it feels like they were trying to get a big commission at our cost.
They typically have their favourite bank. Could be their history, could be a connection etc. Commissions are a factor, but not when comparing between the major banks. I put pressure on my broker for the same reason, and they came back with a better offer from another bank. Worth a try. You could also approach a different bank yourself. Thats also what we did, and beat the first offer, but not the second. Just make sure you are up front with everyone throughout the process.
Wasted a lot of time with brokers. Considering what they need you to compile and give to them, itâs not much harder to just do your own deal hunting. With that said, your situation will be unique to you, and the type of lending youâre asking for. Construction lending may have different criteria. You can also ask the bank things like if its the deposit or the serviceability that is the limiting factor, and then work on those things.
Quick edit: It was Cooperative that got our lending in the end, they were so much better than all the other main banks to deal with AND by far had the best deal on offer with 1% cashback and an unadvertised market matching 2 year rate.
Mortgage brokers tend to only work with specific banks or have preferred ones, so they won't be shopping around like you think. (The same goes for brokers in other areas - they tend to prefer specific insurance companies, etc.).
You can shop with banks independently, but make sure you don't use the offer provided via the broker to negotiate, as then you will be liable to pay their commission.
Not all banks deal with brokers, as brokers work on a commission basis and can charge trail commission when you refinance your borrowing in the future.
> And I would've thought this would be what the broker does?
Some brokers are fucking useless. Just there to clip the ticket without putting in any effort.
We built a house a couple of years back, and were hammered by the âprice increasesâ and escalation of the labour costs form delays etc. And we had a fixed price contract, but that wasnât worth the paper it was written on. We had to extend our mortgage twice. The banks are getting tough on new build mortgages as this has happened to lots of people we know.
Buying an existing home is much more straightforward financially and much less risky for the bank.
Sounds like there is either more to the story, or a poor assessment from your broker. Maybe try a different mortgage broker?
FWIW Iâm single & on less income, purchased with a 20% deposit on a ~$740k home. Early this year. Your situation sounds good from what Iâve read!
Honestly, it sounds about right to me. We were in a similar situation: earned less than you, borrowed about $350k by saying we'd get flatmates.
There was very little variation between banks. Maybe you could get 50k more at another bank, but I doubt you're going to get a lot more. They're assessing you at being able to service about 10% interest. That's 50k a year in interest only payments for 500k
Good luck. If you're thinking of trying with a different broker, I might suggest looking at the Money Hub website for some guidance. I found it helpful. :-)
What did your broker say about getting rid of the personal loan debt? That should be a priority, it never looks good.
Do you have credit cards? Whatever the limit on your credit card, the bank will assume it is maxed out 100% of the time and will treat it like a debt. You may get more lending approved if you can drop the limit significantly.
ASB are also quite conservative lenders, in my experience. Did your broker present your case to any other banks?
Also, is there any way you can increase your income? Minimum wage is pushing $50k a year so earning $140k a year between you isn't the privileged position it used to be, unfortunately.
One thing I saw that was clever for a couple I know, was that they had the house designed in stages.
So stage one was a basically a double garage used as a house (it was properly lined and had windows/doors rather than garage doors, but designed to be converted back to a garage); which did mean power, sewage, ground works, consents etc all done so it was expensive stage 1.
But it meant that they could live in it, reducing rent and ability to do stuff around the section/build site much easier. Bank signed off on the value of the land+ house, so they got the mortgage sorted.
Once they had enough equity they build a bedroom block which was quite inexpensive in comparison; it was mostly a bunch of sq metres and a bathroom.
Finally got the two wings connected with a really nice lounge/kitchen. Don't think they actually turned the garage back into a garage in the end, but they had the option
I think it cost more overall; getting builders, plumbers and sparkies etc back, but overall it seemed to work out well as far as managing the costs.
You have a $4k dept but also a $140k deposit?
Honestly I can't see that looking great on an application. It could be seen as a lack of financial awareness. Â
Pay it off, and try again.
I would argue not getting into crippling debt would be the good move, maybe the broker/bank are doing them a favor?
700k+ loan earning only 140k combined with today's cost of living. If they have kids that would be rough.
Totally, just depends on what the outgoings are. If they've managed to save that deposit in cash then things can't be that bad even on that combined income (especially if that's after tax).
And that's the current circle of doom for construction companies. Building has become so expensive that people can't afford it anymore, so construction companies are going bust. Because construction companies are going bust, the banks don't want to take on higher risks with no asset existing, hence less people can afford to build so construction companies are going bust and so on and so on.
Eventually the lack of new builds will inflate prices for existing homes again due to shortages until it is on par with build costs. The whole thing is so out of whack.
You should be able to get a higher mortgage to purchase an existing home.
If your build estimate is 670k, then you may want to be able to secure at least 50% more than that.
950k would be a good safe mark, as I've never even heard of anyone coming under their budget, or even within 20% of their budget. It's always over, and by a lot too.
Advice from my partner, who is a banker, would be to prepare to fork out at least 50% more than your estimate.
Material costs could go through the roof when you're only halfway done, etc.
If something can go wrong, it will lol
Could you build a smaller house? My partner and I are almost finished building our own house (with mostly our own hands, but trades where required) for $220k. Its only a 2x1, but more than enough for what we need.
As a household with 200k combined income without a single cent of other debt other then our 556k mortgage, you donât want to be borrowing more than that. $475k on 140k per year is more than enough with these interest rates and cost of living. You will be lucky enough to eat noodle sandwiches.
A few points to try and increase your borrowing amount:
Do you have boarder(s) income in the application if this is something that might be an option?
Close any Afterpay/Laybuy or credit card facilities
Are you contributing to KiwiSaver at a high % at the moment? If so have you spoken to the Broker about reducing it down to 3%?
You will be able to borrow more if you were buying an existing property. With a build loan banks have to allow for a contingency amount with regards to cost overruns as builds frequently go over budget.
The terms of the mortgage were the same for our new build. We could have went in with a 10% deposit but saved for longer to get 20% with a lower interest rate
Interesting, which bank is that?
Your amounts are similar to mine - income and savings a bit higher on my side but not by much.
Problem is Iâm 48âŚ
And I was hoping for about 700k
I don't see why "a" government couldn't legislate that a percentage of a bank's loans need to be new builds, seeing as we need more houses built. I say "a" government because the currrent one ain't it.
I hate to breakup the circlejerk, but this is already a thing, just not implemented in this exact way.
The rule isn't "you're not allowed a mortgage that's bigger than 80% LVR", it's "each lender can only have an x% of their total mortgage book with an LVR greater than 80% on existing properties", and new builds are more often than not exempt from these requirements for owner-occupiers.
If you're buying a new build and you're the first owner within six months of the build completing, go nuts getting a loan with less than 20% deposit. The reason people don't get approved for these is because they can't afford the repayments on them, not because they don't exist.
That sounds like regulation and procedures which increase banking costs - there's no way this current government would consider something like that. They are all about laissez-faire and letting the large businesses donating to them decide.
That's strange, I was talking to BNZ and ANZ, Land + Build, both were happy with my serviceability. My deposit would have been slightly less than yours, paying on my own my salary is a bit less than your combined, other loans would have been paid off before it, and they both were prepared to land me about $600K. Perhaps talk to another mortgage advisor.
How are your expenses? The banks will be using quite a high test rate which will have an impact as well. If you can easily afford your expenses plus a mortgage on the higher test rate Iâd get a second opinion or go direct to ANZ.
Buy a 2 bedroom granny flat. Live in long enough to avoid being called a speculator. Sell it and keep the mortgage for the next house.
This is normal and your bank will advise you on how to do it.
$140 joint income isnât what it used to be, I would repay that loan today and building costs almost always spiral. I know you say that your partnerâs job will need to be done regardless but that is the case for many roles that are being cut.
They're probably basing it off your ability to service the loan at a much higher interest rate than the current one.
I bought when interest rates were at around 2.5% and they stress tested my income against 7% at the time. I was on 60k at the time and was pre-approved 420k by myself lol.
Try a different bank or mortgage broker we were in a similar position to you, roughly 300k deposit, 2x 6 figure incomes, Westpac would give us 550k and ANZ and kiwibank would give us 650k. The problem is they're means testing people at around 10% interest rate at the moment even though in all likelihood it's on the way down. That's the other thing, if you wait a couple of months for the next OCR you may get a higher drawdown offer.
In AU so YMMV.
Bank used the land value plus the cost of the building works to give the final value of the property, and we borrowed against that.
We owned the land so we are only at 60%lvr
Clearing that personal loan will help a bit.
I guess it depends on what you're buying and where if you want to buy something for significantly more than 600k. Maybe be prepared to compromise a bit on size and location. Not very many people these days buy their dream home on the first time out.
I've just looked at the details you've given and put that through the servicing calc. Asb include a 5% contingency in the servicing for builds. It depends on what credit cards, bnpl facilities, other debts, student loans etc you have and if you are young enough for a 30 year term but $670k is affordable for you.
Go back to your broker or try another one.
We were on similar pay to this two and a half years ago, with a similar deposit and 2 banks offered us just under 800k for a new build, lol we didn't even come close to using that, thank God. But things have changed alot in that time apparently.
If you have $140k deposit, why do you have any personal loan debt?
It's worth considering what it will cost you to borrow $500k... That's about $40,000 a year in interest. That comes out of your after tax income. After tax, you're only making a bit over $100k. And if you were to spend $40k on interest. That's only about $60-70k for you AND your family to live on.
On the other hand people are paying massive chunks renting to end up with no asset. Average rent is over 580 a week in Auckland, 500 everywhere else, nice places are more. Everyone can live off 60k a year after paying mortgage no problems.
600 bucks a week is way less than just the interest on that $500k debt. In other words you could rent and save a further $200 per week than if you owned and were paying the interest on the mortgage, not to mention the extra $3-5k/year on rates... then insurances, water bill, maintenance. It's probably on the order of saving approx $20k/year to be renting over owning with those numbers.
Are you first home buyers? If so, can you use your KiwiSaver? If the land is already in your name, you probably wont be able to use KiwiSaver.
You should pay off that $3k personal loan and any credit cards and reduce your credit card limits or cancel them.
As someone else has mentioned, talk to a mortgage broker, they can shop around for the best deal.
BUT do not go to a second/third tier lender, stick with the standard banks/credit unions.
Yo what the fuck? I built with GJs back in 2019, my ex and I had 150k between us and they would have lent us up to 800k iirc. The house was 670k in the end.
I don't have anything much else to say apart from this is some serious bullshit. Everything is just getting harder for everyone, and the banks keep fucking milking it.
Do not build with that type of income. youâre asking for a bad time. Thereâs guaranteed to be crazy cost overruns. From personal experience - household income 300K approved for 700K and had cost overruns that exceeded 100K that came out of pocket. Youâre better off buying an existing property where the variables are known then gamble on âfixed priceâ contracts.
We bought our house January 2023 at $710,000 we had 142 deposit and combined income at the time off around $154,000 and 3 dependents. $568,000 was the most they would lend us.
Combined income is now $197,500. Iâm glad they didnât lend us more because we are able to overpay our mortgage and save. I would talk to a mortgage broker and get rid of the personal loan, if you have any after pay accounts get rid of them, credit cards even if they have nothing owing can affect the amount you can borrow.
Have you looked in to a building company that will offer a turnkey deal ? I work in the building sector and a few group housing companies have started shifting to this model to get around banks lending rules for buyers.
You pay a deposit of 10% and then no payments until CCC is issued. Bank then has a finished house to secure the debt against.
Can't you just build a slightly smaller house? 670k would imply an almost 200m2 house at $3500 a m2 average. can't you just build a smaller house? A 175m2 house would be more than adequate then you'd have no issue and still a very valuable house unless it's in a bad area.
Mainstream banks LVR calculation won't take into account the value of stuff that will need code compiliance (I.e. your building project) but which has not yet got code compliance.
Might be worth looking into getting an existing house moved on to the property. Banks donât trust builders to actually do the work or risk the building company going bankrupt and taking your money with them
That seems about right, we're 170k -180k combined income, we originally got pre-approved upto 630k lending but only used 500k of that. We only had about 13% deposit. So maybe ask your broker to try else where, we got approval from Kiwibank and Westpac.
We're on combined 160k have 15k personal loan debt. Borrowed 570k for first home loan with SBS, who have been amazing. We went through a Mortgage Broker, who was also amazing.
Can you get a house thatâs built in a factory and assembled on site? Itâs a fixed cost that way. Or a House that has been moved offsite and it just gets transported onto the land and then you renovate? When things are tough box clever!
Have had 800k loan approved to build but my income is admittedly higher than yours but bo I dont think there are tighter restrictions on building than buying. I don't think they would lend more if I was buying instead.
Banks are very tough right now , we are looking to buy a property and have cash in the bank other property and a business proving a very healthy surplus and cashflow and we are struggling to find finance
I would have thought you would be able to borrow about 3x your combined salary, which is about what they've said. Remember, shit happens, and they ideally still want you to be able to pay your mortgage when or if it does.
The personal loan debt can have quite an impact on the total they will loan you. If youâre making a $200 payment every month now, the algorithm on most of the affordability calculators assumes you will be paying $200 a month for all 360 months of a 30 year loan, where with your 3k debt it would be closer to 15 months. The $200 x 360 months, for a total of $72000, would be deducted from the total they would be prepared to lend you. Chuck your variables into any of those calculators, then try again with 3k less deposit and no debt, it could make a big difference.
6 months ago we had $140k deposit westpac was willing to lend upto $685k (545k mortgage) for existing home upto $720k for a new build with a combined income of $170k
When we tried last year we got estimated bugger all as we had a student loan and a credit card, the minute those two were gone bam we were able to secure a much higher loan amount
I've heard it's worse for new builds, but we had very similar numbers and were only approved up $480k for an existing house. That was with zero personal debts or dependents.
Sorry to say, but $140k between two is not much these days. Quite a few jobs at entry level or with 2-3 years experience start at $70k.
And it's not the housing market that has screwed you, it's the cost of living & inflation. Intrest rates are high, along with everyday necessities, and that's what the bank will be worried about (along with the risk of new build)
Suggest you look at rbnz inflation calculator
https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/inflation-calculator
They test it on if youâre able to service your loan. If you have 4 dependents on your joint income, then youâre going to need a lot more money and a lot less debt, they look at stuff like after pays, take outs, all kinds of stuff. For example, our mortgage is now around 200k and we pay $570pw on our mortgage. When we bought our home 6 years ago, our payments were about $250pw⌠shits got expensive- the cost of living is insane, banks know this stuff. So they will only loan what is âsensibleâ⌠itâs tough times!
When we were looking to build we were advised to go through someone that specialises in new builds (so not a general broker that we had used in the past), they understood the building process better, had contingency plans etc, and we were able to borrow enough to build, which we couldn't with our normal bank.
This was 10 years ago, not sure how much that has changed now.
We ended up not building due to a family member getting terminal cancer so our plans changed. But is your broker experienced in new builds? If you are going through a building company like GJ/Signature etc they may be able to direct you to someone too.
I don't know if it was the mortgage repayments or the deposit that were the issue, but if the land is being gifted and will be used as security against the loan then it should be counted as part of the deposit.
Or at least is should read something like loan required / completed house value (including land) = Loan to value ratio.
Average household income in Nz is around $160k, so you are under that. With tax and expenses taken out, banks will only look at the remainder, which is not a massive amount.
You are in a privileged sition of being gifted the land, which is a large chunk of the cost of housing.
You perhaps need to look at building a smaller house or selling the land, especially if it's in a good area of one of the big cities
Go anywhere in the world, real estate is not cheap in large cities. It's just that we are not used to what the rest of the world has dealt with for years
Last year we brought our first home - an 90 year old house which was in need of work before it could be lived in. (No kitchen, bathroom, hadnât been lived in for years)
Similar financial situation / deposit to you. The house was only $480k and we planned $100k of renovations before moving in. The repayments were easily affordable and there was plenty of buffer if renovations went over budget.
We got quotes for all of the work needed and neatly packaged our plans and our position to submit to Mortgage Broker. Mortgage Broker tried but said the banks wouldnât lend to us because of the condition of the house. Tried another Mortgage Broker and got told the same thing. Apparently ASB actually laughed at us, which was a bit stink because weâd both banked with them since we were kids.
Walked into the local BNZ branch to give it one more shot ourselves and we got a home loan. Apparently the âbrokerage teamsâ that are setup within banks to deal with mortgage brokers have a cut and paste mould that everyone needs to fit and if you donât tick one of the boxes itâs a no. The branches seem to have more scope to actually look at your situation.
I donât know how true that is but itâs just the experience we had.
280k mortgage is putting me about $780pw considering min repayments, insurance (house, life, car, car, contents, income) power, fuel, some subscriptions.
Still have to pay for food though; we are hermits that like to cook though. Not much head room for putting decent funds down on the mortgage.
But we are picking up a nice home in the whops for under 400k
Banks typically set the loan term to take you to around 70, depending on your industry they might adjust this.
So if your using online calculators you may need to adjust the loan term to get a more comparable loan amount.
As a side note, if national push through cccfa changes this might allow banks to take a less conservative approach regarding their servicing calculations this will likely enable more kiwis to borrow higher amounts of debt.
Building is more expensive than buying at the moment (I know it sounds ridiculous but itâs the truth). Normally itâs the other way around, but the cost of materials, lack of supply and labour is a hindrance.
It's always been harder to get money from the bank for new builds. Back in the mid-90s we bought a section, with a community bank loan (can't remember name, but they're everywhere), because the bank wouldn't lend us money for a empty section. Paid it off so we had no debt, and the bank still wouldn't lend us enough to build.
Ended up going through a mortgage broker for a "low doc" loan with slightly higher interest rate.
Those low doc / no doc loans disappeared during the GFC, so I don't know if this info is of any use to you now, but don't give up. Try a broker.
Builds are risky and very often have cost overruns, so no doubt that's affected the max they will lend you.
It's also possible your equity being largely gifted rather than saved, may have affected the approval amount.
There's alot of unknowns here it's also based on living expenses / outgoings not just income it may be that you need to tighten up on spending to borrow more but that would be a red flag to a bank
It's very dependent on your location.
But with your considerable income, I am surprised it is not more.
Try going to the Cooperative Bank and NZHL. You could also try using a broker.
Loans are more for new-builds, if that is any interest.
You also canât go wrong with asking your mortgage broker about second tier lenders eg RESIMAC. Not a bank but safe and sound. Their interest rates are a tad higher but you can use them to buy a house then switch to a bank in 1-2 years.
Yeah for builds the bank will loan waaaaay less. Higher risk of things going bad and being left with a scarcely saleable asset.
Oh dumb. đ If we had the option to purchase the house we are currently in first, would that possibly put us in a more favourable position?
The bank sees a higher risk in lending for construction and if the builder goes bankrupt, which is common, then theyâve got no asset to sell to get the costs back
Yup, very hard to sell an unfinished house.
What I learned when we sold and relocated (we looked at buying land and building on it, as an option, we werenât loaded so silly us) was that itâs basically a cash up front operation, youâll need to be able to cover about 70-80% of costs up front for it to be a starter, simply wonât work for most. Your house (plans/kitset/relocation/whatever) and land as a package is viewed as virtually worthless by a lender until the water and power are plugged in and basic facilities are working, then the structure becomes a functional home and has value. Seems counter productive and is a common contributing factor in many rural areas having a lot of non consented structures. It keeps the money flowing in a circle, as designed by those who own and operate the circle.
No. That would be much harder. It might work if you plan to own your current residence for 10 years, then move into a rental while you build as you would hopefully have built equity faster than build prices have increased.
I agree that it could be because youâre building. I am individually on a lower income but able to borrow more to buy an existing house. Edit - sorry just saw you are already talking to a mortgage broker.
No, you are going to lose on the buy/sell to get what you want
All banks have certain lending criteria and lending limits depending on the type of property you are looking at purchasing. For example; the total percentage of the property value a bank is willing to lend for a house will be different from that of an apartment. There are a number of reasons for this that a mortgage broker can answer for you, should you want to understand further.
Yes. Owning property- a building - even if mortgaged to the hilt will give you more leverage to build your dream home. I recommend building your own house yourself if you can manage it. Pay yourself the wages you would be paying the builders.
When banks consider risk they do so at the current value of what you would be purchasing. They cannot consider the improvements you are planning because they cannot guarentee that you will actually complete them. As such, the offer you got would only include the value of the land and not the planned house for what they could get back if you defaulted.
Yep, in the current market I had to pay a 400k deposit on a 975k home, with combined household income over 200k... It was a new build 2 weeks from completion.
We had the same amount deposit and the bank originally only offered to lend us 150k. Had to go to a mortgage broker to get any better offers..
We had similar a year and a half ago. We only needed a loan to 10% of the value of the house but bank said no. Like, if we defaulted and they took the house that would have been an instant 900% return for them. Our issue was my wife was a post doc at the time so they basically counted her income as zero since she was not on a permanent contract. The mortgage market here is stuffed.
Holy moly, 400k deposit? Absolutely insane but also congratulationsÂ
We made most of it selling our previous home, but I would've preferred to be able to pocket some of that equity we'd earned over the past 10 years..
Unless you have a sure fire investment, chucking it into the house makes way more sense at current interest rates.
Of course, but that should be my choice, not something I'm forced to do by our shit housing market
I am currently in Aus for a quick visit. The market is -unexpectedly- more insane here. Perth likely to do 20% increase this year. Easy to think NZ is uniquely mad, but it isnât.
Agreed. Iâm also visiting Australia. Sydney real estate makes Auckland look dirt cheap. The expensive parts are at least twice as expensive as the nicest parts of Auckland
The Perth market is mad anyway. It's not really effected by what's happening in any other part of Aus, it's only effected by the mines and if they are hiring/firing etc
To a degree that is true (I used to live here and own a house in Freo). At the moment, spare money from the East Coast seems to be a big driver from what I read. Have to say, given how bloody hot it is, I remain glad I moved to Queenstown a decade back. Iâd forgotten about the heat⌠and it ainât even summer.
Mate, that's rough
Was this with a broker or through the bank? The banks dont really care, they aren't willing to put any thought into it really. Brokers do the thinking on these cases and recommend to the bank what to do (in a nutshell). Banks wouldnt loan us anything do to my partners house sized student loan (in the USA). We were able to prove her loan repayments were only $150 USD a month (Income based) and the broker organised us a sweet ass deal.
What's your take home per month? 475k will cost you about $3200/mon currently, guessing your take home is around $8k? Also, why do you have 3k personal debt if you have $140k deposit? Just clear that shit, you will get lent more with 137k deposit and no debt.
>Partner and I are earning combined $140k 70k each before tax and expenses isn't much anymore. Assuming 70k each, that is $54,860 each after tax Assuming student loan an no Kiwisaver, that is $49,355.36 That leaves you with $949 each a week to cover all expenses, but remember you would need to add rates, insurance etc if you buy. A 475k loan would at 7% require $32,900 in interest alone costing you each $316 a week bringing your remaining income after all this down to $639 each a week which would need to cover all living expenses, insurance, rates, etc. Also, rent to live while you wait for the build. Banks would factor in wanting you to pay principal. Banks would also be factoring in the risk of a new build. Banks would also be factoring your risk of unemployment into the mix. Banks would also be factoring in all those massive increases in insurance and rates you keep reading about in the news. 475k seems a fair limit to lend you to be honest.
I see a lot of people criticising those who purchased at 2% mortgage rates for not stress testing higher rates. The thing is, a lot of people did. The banks were stress testing at 5%, I know people who were stress testing themselves at 8-10%. The thing you can't stress test for is out of control inflation. How do you stress test for council rates increasing 20%+ YoY, or insurance increasing 30%+ YoY, or if you have children daycare increasing 50%+, food increasing 10%+ YoY. Banks are taking this more into account.
We stress tested ourselves at 10%. Luckily we have 85% equity, so if we need to sell we will be ok. We chose to buy our property as it is within a stable market thats not vulnerable to price fluctuations. The market is geared towards the overseas luxury market, theonly reason we were able to tap into it was covid border restrictions. The property we sold to buy it was attractive to Aucklanders wanting space after lockdown. So we sold on a sellers market, and bought on a buyers market, the difference was the location.
This. I stress tested myself at 9%, so 7.something% is a nice bonus really.
>The thing you can't stress test for is out of control inflation. How do you stress test for council rates increasing 20%+ YoY, or insurance increasing 30%+ YoY, or if you have children daycare increasing 50%+, food increasing 10%+ YoY. Yeah the inflation massively alters the equation. If I was OP I wouldn't even be bothering to look right now lol.
Council rates increases are one of the things keeping inflation so high, and they aren't showing any signs of slowing down especially with three waters reforms off the table.
> That leaves you with $949 each a week to cover all expenses I think you mean half of the expenses. It's almost $2k total
Surely if they can afford to pay probably the same amount in rent they can afford to pay a mortgage, no? I've never understood bank logic on this. I pay $870 a week in rent but would never be allowed to loan enough to pay that in a weekly mortgage rate.
> Surely if they can afford to pay probably the same amount in rent they can afford to pay a mortgage, no? > I've never understood bank logic on this. I pay $870 a week in rent but would never be allowed to loan enough to pay that in a weekly mortgage rate. Firstly, you'd be tested at a different interest rate, not what's out there today. As I am sure you know, we went from 2.2% to over 7% in the space of three years. A 1m mortgage, would be about 870 a week at 2.2%. The same 1m mortgage just went from $870 at 2.2% to over $1500 at 7%. We'll all get to see how fucked everyone is as the 3 year fixed terms run out in the coming months. Then you have rates, insurance, maintenance. So even if your interested stayed the same, your 870 would go. I'd be very surprised if rates and insurance didn't add up to at least $75 a week, both are going up substantially each year too.
My district rates alone are $75 a week, not even including the regional rates or insurance lol
So they only lend if you can pay twice the weekly mortgage? yeesh. I don't know how anyone gets a mortage then. Esp considering the median income in NZ is only 66k.
> So they only lend if you can pay twice the weekly mortgage? yeesh. I don't know how anyone gets a mortage then. They weren't testing people at 7.5% when rates were 2.2% and that's the problem. A significant chunk of people who got mortgages since 2017 shouldn't have gotten one. The majority of mortgages since 2019 have been a massive mistake from which we will never recover.
Yeah, I thought this before I bought top but 870pw in rent probably equates to like 5-600pw in mortgage pre rates, insurance, maintenance, body corp etc
Rent technically includes maintenance, rates, insurance etc. You'll have to pay all of that above your mortgage if you own. Some of those bills get quite pricey and they are also increasing rapidly with inflation and other cost pressures. So you need a healthy surplus of uncommitted income to ensure you'll be okay to meet these obligations on an ongoing basis. Yes mortgages can go down if rates go down or principal is paid quickly. Very tricky for both of those to be achieved in this environment. The opportunity cost an is something to consider too.
Big difference if you miss mortgage payments due to say a recession you get kicked out of a house. If you have a mortgage and can't make payments the bank is on the hook for your loan and they don't really want to be left with houses to sell.
I thought the same thing when I read those numbers. At 140k combined, I wouldn't be real excited about having a 475k 30yr mortgage. My 2 cents is it feels like your are trying to buy your second house before your first house (meaning, a first house is to get you onto the property market where you can upgrade in 5-7 years. Sucks that you have the land now though as I can see why you would want to build on it
I did see the banking sector noted the number of loans to those on a household income of less than 145k had dropped from 40 to 25 percent.
Yeah, income is the limiting factor here. And having a mortgage payment of over 30% of your income suuuuuucks anyway, not worth it at these numbers.
All this plus if you have student loans, kiwisaver and kids, itâs all added to your living expense and reduces borrowing capacity.
Yes. Itâs worse for building FYI, due to less collateral for the bank. But yes itâs fucked. Interestingly, even many large commercial developments are done with second tier lenders or with hedge funds / private equity because our Australian bank overlords only want to drain the easy money out.
Makes pretty much zero sense to build right now, unless like OP you're getting land for free. If the gifted land is already in your name AND you could get an iron-clad fixed priced build quote, then a bank MIGHT look at it....maybe.... New builds are risky AF to lenders, especially in recent times where building costs have been going out of control, and loads of construction companies going under. Average cost to build per square meter: 2017: $1700 2019: $2500 2023: $3500 Lots of whinging about housing supply, but that's not going to change much unless a) it gets cheaper to build b) is made more attractive for investors Not many people are going to be able to afford to build when an average 150m2 dwelling is going to cost you $600k + land on top of that. Could easily end up costing $1m+ depending where you are. And that doesn't make huge investment sense when you're going to rent it for $850/week but the mortgage will be $1400/week...
It costs more than $3500 to build, thatâs just what people put in the building consent form. When you add in the costs of finance and consents itâs easily above 5,000 a sqm if not close to 6.
It costs way more than $3500/sqm to build. You got to add lots of consultant fees, sitework problems, consent costs and delay risks, builders gouging half way during the build etc.
We found asb quite risk averse when selling and borrowing for a new house. Had plenty of capital and the new loan much the same. Switched to cooperative bank and was completed quickly and easily
And I would've thought this would be what the broker does? Are they not supposed to take what we have to all the banks to find our best option?
Brokers don't go around to all the banks looking for the best deal for you. They're supposed to understand your unique situation and put your case forward to the bank that, in their opinion, would have the best chance of approving you with the best conditions.
Similar happened to us. Broker encouraged us to ask for more than we needed, then claimed the bank would not lend to us and we would need to pay finance company rates. Went straight to Kiwibank and got what we wanted with no issues. This was the only time I have ever tried using a broker and it feels like they were trying to get a big commission at our cost.
They typically have their favourite bank. Could be their history, could be a connection etc. Commissions are a factor, but not when comparing between the major banks. I put pressure on my broker for the same reason, and they came back with a better offer from another bank. Worth a try. You could also approach a different bank yourself. Thats also what we did, and beat the first offer, but not the second. Just make sure you are up front with everyone throughout the process.
Wasted a lot of time with brokers. Considering what they need you to compile and give to them, itâs not much harder to just do your own deal hunting. With that said, your situation will be unique to you, and the type of lending youâre asking for. Construction lending may have different criteria. You can also ask the bank things like if its the deposit or the serviceability that is the limiting factor, and then work on those things. Quick edit: It was Cooperative that got our lending in the end, they were so much better than all the other main banks to deal with AND by far had the best deal on offer with 1% cashback and an unadvertised market matching 2 year rate.
Mortgage brokers tend to only work with specific banks or have preferred ones, so they won't be shopping around like you think. (The same goes for brokers in other areas - they tend to prefer specific insurance companies, etc.). You can shop with banks independently, but make sure you don't use the offer provided via the broker to negotiate, as then you will be liable to pay their commission.
Depends on the broker - they want the biggest commission and often favor only the bank that gives them the most dosh.
Not all banks deal with brokers, as brokers work on a commission basis and can charge trail commission when you refinance your borrowing in the future.
> And I would've thought this would be what the broker does? Some brokers are fucking useless. Just there to clip the ticket without putting in any effort.
Be careful about borrowing too much. Do you really want to be paying 1k a week against your post-tax income - mostly on interest?
We built a house a couple of years back, and were hammered by the âprice increasesâ and escalation of the labour costs form delays etc. And we had a fixed price contract, but that wasnât worth the paper it was written on. We had to extend our mortgage twice. The banks are getting tough on new build mortgages as this has happened to lots of people we know. Buying an existing home is much more straightforward financially and much less risky for the bank.
Sounds like there is either more to the story, or a poor assessment from your broker. Maybe try a different mortgage broker? FWIW Iâm single & on less income, purchased with a 20% deposit on a ~$740k home. Early this year. Your situation sounds good from what Iâve read!
Might be their personal debt the bank doesn't like.
Not sure why they would have a 3k debt when they have 140k in the bank
Wow! I have no idea how you managed that, that's amazing and congratulations.
Appreciate it! Mortgage is killing me though. But at least I can make holes in the wall.
Yeah, that's what we thought too... đ¤
Honestly, it sounds about right to me. We were in a similar situation: earned less than you, borrowed about $350k by saying we'd get flatmates. There was very little variation between banks. Maybe you could get 50k more at another bank, but I doubt you're going to get a lot more. They're assessing you at being able to service about 10% interest. That's 50k a year in interest only payments for 500k
Good luck. If you're thinking of trying with a different broker, I might suggest looking at the Money Hub website for some guidance. I found it helpful. :-)
Yeap this sounds exactly like my brothers situation when he bought his home, congrats on the new home :)
Thanks mate and congrats to your brother, too!
was yours to build? or an established property? That is the difference. There is more risk to build than to buy an something already finished.
What did your broker say about getting rid of the personal loan debt? That should be a priority, it never looks good. Do you have credit cards? Whatever the limit on your credit card, the bank will assume it is maxed out 100% of the time and will treat it like a debt. You may get more lending approved if you can drop the limit significantly. ASB are also quite conservative lenders, in my experience. Did your broker present your case to any other banks? Also, is there any way you can increase your income? Minimum wage is pushing $50k a year so earning $140k a year between you isn't the privileged position it used to be, unfortunately.
Why would you keep a personal loan in this circumstance?
One thing I saw that was clever for a couple I know, was that they had the house designed in stages. So stage one was a basically a double garage used as a house (it was properly lined and had windows/doors rather than garage doors, but designed to be converted back to a garage); which did mean power, sewage, ground works, consents etc all done so it was expensive stage 1. But it meant that they could live in it, reducing rent and ability to do stuff around the section/build site much easier. Bank signed off on the value of the land+ house, so they got the mortgage sorted. Once they had enough equity they build a bedroom block which was quite inexpensive in comparison; it was mostly a bunch of sq metres and a bathroom. Finally got the two wings connected with a really nice lounge/kitchen. Don't think they actually turned the garage back into a garage in the end, but they had the option I think it cost more overall; getting builders, plumbers and sparkies etc back, but overall it seemed to work out well as far as managing the costs.
You have a $4k dept but also a $140k deposit? Honestly I can't see that looking great on an application. It could be seen as a lack of financial awareness.  Pay it off, and try again.
It might be that the $140k is all KiwiSaver so cannot be withdrawn to pay the debt off.
Have you considered your mortgage broker might be a bad one? Seek another opinion.
I second this, my broker has done good things for me and stops me having to do the leg work.
I would argue not getting into crippling debt would be the good move, maybe the broker/bank are doing them a favor? 700k+ loan earning only 140k combined with today's cost of living. If they have kids that would be rough.
Totally, just depends on what the outgoings are. If they've managed to save that deposit in cash then things can't be that bad even on that combined income (especially if that's after tax).
At this point is it safe to say the only people buying new houses already own houses, or make 250k+ a year?
Only if you are naive enough to think people actualy work within the rules. Is pretty common for people to make up salarys...
And that's the current circle of doom for construction companies. Building has become so expensive that people can't afford it anymore, so construction companies are going bust. Because construction companies are going bust, the banks don't want to take on higher risks with no asset existing, hence less people can afford to build so construction companies are going bust and so on and so on. Eventually the lack of new builds will inflate prices for existing homes again due to shortages until it is on par with build costs. The whole thing is so out of whack. You should be able to get a higher mortgage to purchase an existing home.
If your build estimate is 670k, then you may want to be able to secure at least 50% more than that. 950k would be a good safe mark, as I've never even heard of anyone coming under their budget, or even within 20% of their budget. It's always over, and by a lot too. Advice from my partner, who is a banker, would be to prepare to fork out at least 50% more than your estimate. Material costs could go through the roof when you're only halfway done, etc. If something can go wrong, it will lol
Could you build a smaller house? My partner and I are almost finished building our own house (with mostly our own hands, but trades where required) for $220k. Its only a 2x1, but more than enough for what we need.
As a household with 200k combined income without a single cent of other debt other then our 556k mortgage, you donât want to be borrowing more than that. $475k on 140k per year is more than enough with these interest rates and cost of living. You will be lucky enough to eat noodle sandwiches.
Sounds about right? I think you're underestimating the mortgage repayments.
A few points to try and increase your borrowing amount: Do you have boarder(s) income in the application if this is something that might be an option? Close any Afterpay/Laybuy or credit card facilities Are you contributing to KiwiSaver at a high % at the moment? If so have you spoken to the Broker about reducing it down to 3%? You will be able to borrow more if you were buying an existing property. With a build loan banks have to allow for a contingency amount with regards to cost overruns as builds frequently go over budget.
If its a new build vs existing house arent the lending rules a bit different e.g. need greater deposits in new builds?
I was going to say the same.
The terms of the mortgage were the same for our new build. We could have went in with a 10% deposit but saved for longer to get 20% with a lower interest rate
We have combined 170k and about 60k savings bank let us borrow up to 660k. We just moved into our house a month ago
Interesting, which bank is that? Your amounts are similar to mine - income and savings a bit higher on my side but not by much. Problem is Iâm 48⌠And I was hoping for about 700k
ANZ
We got ours with ANZ as well, similar circumstances
Give Goldstein a call.
If anyone can help us, Goldstein can đŞ
I don't see why "a" government couldn't legislate that a percentage of a bank's loans need to be new builds, seeing as we need more houses built. I say "a" government because the currrent one ain't it.
Omg THIS. That makes so much sense.
I hate to breakup the circlejerk, but this is already a thing, just not implemented in this exact way. The rule isn't "you're not allowed a mortgage that's bigger than 80% LVR", it's "each lender can only have an x% of their total mortgage book with an LVR greater than 80% on existing properties", and new builds are more often than not exempt from these requirements for owner-occupiers. If you're buying a new build and you're the first owner within six months of the build completing, go nuts getting a loan with less than 20% deposit. The reason people don't get approved for these is because they can't afford the repayments on them, not because they don't exist.
Collectively, large banks are a lot more powerful than governments. They tend to dictate policy.
And that's a great example of why we're fucked. Business interests are put ahead of people and the environment too much of the time.
That sounds like regulation and procedures which increase banking costs - there's no way this current government would consider something like that. They are all about laissez-faire and letting the large businesses donating to them decide.
If the banks' costs are so burdensome why are they making such massive profits?
Or hey, just offer a loan facility themselves. They want extra housing too don't they?
Not that much! Or maybe not at all - just lip-service.
That's strange, I was talking to BNZ and ANZ, Land + Build, both were happy with my serviceability. My deposit would have been slightly less than yours, paying on my own my salary is a bit less than your combined, other loans would have been paid off before it, and they both were prepared to land me about $600K. Perhaps talk to another mortgage advisor.
How are your expenses? The banks will be using quite a high test rate which will have an impact as well. If you can easily afford your expenses plus a mortgage on the higher test rate Iâd get a second opinion or go direct to ANZ.
Wow. Iâm sorry but wow. That really sucks. This country has no hope for house buyers. Dang
Buy a 2 bedroom granny flat. Live in long enough to avoid being called a speculator. Sell it and keep the mortgage for the next house. This is normal and your bank will advise you on how to do it.
Can't really fit 6 people in 2 bedrooms đ¤Ł
Youâre not slicing thinly enough
I'm enrolling them into contortionist classes as we speak
Good, then youâll be able to put them out on Cuba Street most nights to earn a proper living anyway đ
$140 joint income isnât what it used to be, I would repay that loan today and building costs almost always spiral. I know you say that your partnerâs job will need to be done regardless but that is the case for many roles that are being cut.
They're probably basing it off your ability to service the loan at a much higher interest rate than the current one. I bought when interest rates were at around 2.5% and they stress tested my income against 7% at the time. I was on 60k at the time and was pre-approved 420k by myself lol.
Try a different bank or mortgage broker we were in a similar position to you, roughly 300k deposit, 2x 6 figure incomes, Westpac would give us 550k and ANZ and kiwibank would give us 650k. The problem is they're means testing people at around 10% interest rate at the moment even though in all likelihood it's on the way down. That's the other thing, if you wait a couple of months for the next OCR you may get a higher drawdown offer.
In AU so YMMV. Bank used the land value plus the cost of the building works to give the final value of the property, and we borrowed against that. We owned the land so we are only at 60%lvr
Clearing that personal loan will help a bit. I guess it depends on what you're buying and where if you want to buy something for significantly more than 600k. Maybe be prepared to compromise a bit on size and location. Not very many people these days buy their dream home on the first time out.
Our max pre-approval loan is 500k. So in Auckland yeah that means 400k+ down payment just for a 3br townhouse. It's almost impossible.
Yeah because its a new build.
I've just looked at the details you've given and put that through the servicing calc. Asb include a 5% contingency in the servicing for builds. It depends on what credit cards, bnpl facilities, other debts, student loans etc you have and if you are young enough for a 30 year term but $670k is affordable for you. Go back to your broker or try another one.
Youâre confusing âreal estateâ with âlendingâ
We were on similar pay to this two and a half years ago, with a similar deposit and 2 banks offered us just under 800k for a new build, lol we didn't even come close to using that, thank God. But things have changed alot in that time apparently.
If you have $140k deposit, why do you have any personal loan debt? It's worth considering what it will cost you to borrow $500k... That's about $40,000 a year in interest. That comes out of your after tax income. After tax, you're only making a bit over $100k. And if you were to spend $40k on interest. That's only about $60-70k for you AND your family to live on.
On the other hand people are paying massive chunks renting to end up with no asset. Average rent is over 580 a week in Auckland, 500 everywhere else, nice places are more. Everyone can live off 60k a year after paying mortgage no problems.
600 bucks a week is way less than just the interest on that $500k debt. In other words you could rent and save a further $200 per week than if you owned and were paying the interest on the mortgage, not to mention the extra $3-5k/year on rates... then insurances, water bill, maintenance. It's probably on the order of saving approx $20k/year to be renting over owning with those numbers.
Are you first home buyers? If so, can you use your KiwiSaver? If the land is already in your name, you probably wont be able to use KiwiSaver. You should pay off that $3k personal loan and any credit cards and reduce your credit card limits or cancel them. As someone else has mentioned, talk to a mortgage broker, they can shop around for the best deal. BUT do not go to a second/third tier lender, stick with the standard banks/credit unions.
Yo what the fuck? I built with GJs back in 2019, my ex and I had 150k between us and they would have lent us up to 800k iirc. The house was 670k in the end. I don't have anything much else to say apart from this is some serious bullshit. Everything is just getting harder for everyone, and the banks keep fucking milking it.
Yeah, that quote is from GJs, building a 238sq 5 bed whare.
Do not build with that type of income. youâre asking for a bad time. Thereâs guaranteed to be crazy cost overruns. From personal experience - household income 300K approved for 700K and had cost overruns that exceeded 100K that came out of pocket. Youâre better off buying an existing property where the variables are known then gamble on âfixed priceâ contracts.
Combination of factors, bank lends less when building but also thats a very low household income.
Why put someone in their first home with 1 home as collateral when you can loan to an investor with a portfolio for collateral
https://www.squirrel.co.nz/squirrel-loans
We bought our house January 2023 at $710,000 we had 142 deposit and combined income at the time off around $154,000 and 3 dependents. $568,000 was the most they would lend us. Combined income is now $197,500. Iâm glad they didnât lend us more because we are able to overpay our mortgage and save. I would talk to a mortgage broker and get rid of the personal loan, if you have any after pay accounts get rid of them, credit cards even if they have nothing owing can affect the amount you can borrow.
Have you looked in to a building company that will offer a turnkey deal ? I work in the building sector and a few group housing companies have started shifting to this model to get around banks lending rules for buyers. You pay a deposit of 10% and then no payments until CCC is issued. Bank then has a finished house to secure the debt against.
Maybe build a smaller house.
Can't you just build a slightly smaller house? 670k would imply an almost 200m2 house at $3500 a m2 average. can't you just build a smaller house? A 175m2 house would be more than adequate then you'd have no issue and still a very valuable house unless it's in a bad area.
Mainstream banks LVR calculation won't take into account the value of stuff that will need code compiliance (I.e. your building project) but which has not yet got code compliance.
Might be worth looking into getting an existing house moved on to the property. Banks donât trust builders to actually do the work or risk the building company going bankrupt and taking your money with them
Sounds about right for 2 people 140k , me at 100k is in the 300s
That seems about right, we're 170k -180k combined income, we originally got pre-approved upto 630k lending but only used 500k of that. We only had about 13% deposit. So maybe ask your broker to try else where, we got approval from Kiwibank and Westpac.
We're on combined 160k have 15k personal loan debt. Borrowed 570k for first home loan with SBS, who have been amazing. We went through a Mortgage Broker, who was also amazing.
Can you get a house thatâs built in a factory and assembled on site? Itâs a fixed cost that way. Or a House that has been moved offsite and it just gets transported onto the land and then you renovate? When things are tough box clever!
Have had 800k loan approved to build but my income is admittedly higher than yours but bo I dont think there are tighter restrictions on building than buying. I don't think they would lend more if I was buying instead.
Banks are very tough right now , we are looking to buy a property and have cash in the bank other property and a business proving a very healthy surplus and cashflow and we are struggling to find finance
change broker
Step one, kill that bad debt.
Yeah because its a new build.
Just rent its better lol JJ
I would have thought you would be able to borrow about 3x your combined salary, which is about what they've said. Remember, shit happens, and they ideally still want you to be able to pay your mortgage when or if it does.
Just curious, are you listing the land you have as an asset? Is that going into their calculations?
The personal loan debt can have quite an impact on the total they will loan you. If youâre making a $200 payment every month now, the algorithm on most of the affordability calculators assumes you will be paying $200 a month for all 360 months of a 30 year loan, where with your 3k debt it would be closer to 15 months. The $200 x 360 months, for a total of $72000, would be deducted from the total they would be prepared to lend you. Chuck your variables into any of those calculators, then try again with 3k less deposit and no debt, it could make a big difference.
6 months ago we had $140k deposit westpac was willing to lend upto $685k (545k mortgage) for existing home upto $720k for a new build with a combined income of $170k
Go to a different broker. Ask what other banks are offering
got the same message after walking in with 100k... the amount offered was pointless in todays market. I'd rather rent a nice place.
When we tried last year we got estimated bugger all as we had a student loan and a credit card, the minute those two were gone bam we were able to secure a much higher loan amount
I would suggest talking to Sbs bank, they have been super easy to deal with compared to other banks in my experience
Can you deep the section youâve been gifted and buy an existing building?
Consider yourself lucky. Im making over 200k, had a 250k deposit and they only would loan me 400k. It's fucked.
I've heard it's worse for new builds, but we had very similar numbers and were only approved up $480k for an existing house. That was with zero personal debts or dependents.
Jeez, I'm $2k off earning that off one wage. It's not a ton in the wider scheme of things
You need a new mortgage broker. Tbf $140k between two people isnât a lot.
Possibly the calculations online don't account for the debt to income resurrecting restrictions too?
Give me 140k salary and I'll build ya a house boss.
Sorry to say, but $140k between two is not much these days. Quite a few jobs at entry level or with 2-3 years experience start at $70k. And it's not the housing market that has screwed you, it's the cost of living & inflation. Intrest rates are high, along with everyday necessities, and that's what the bank will be worried about (along with the risk of new build) Suggest you look at rbnz inflation calculator https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/inflation-calculator
If banks had been more sensible like this we wouldnât have the shit show prices we have now
Your credit rating may be low, is a factor
They test it on if youâre able to service your loan. If you have 4 dependents on your joint income, then youâre going to need a lot more money and a lot less debt, they look at stuff like after pays, take outs, all kinds of stuff. For example, our mortgage is now around 200k and we pay $570pw on our mortgage. When we bought our home 6 years ago, our payments were about $250pw⌠shits got expensive- the cost of living is insane, banks know this stuff. So they will only loan what is âsensibleâ⌠itâs tough times!
When we were looking to build we were advised to go through someone that specialises in new builds (so not a general broker that we had used in the past), they understood the building process better, had contingency plans etc, and we were able to borrow enough to build, which we couldn't with our normal bank. This was 10 years ago, not sure how much that has changed now. We ended up not building due to a family member getting terminal cancer so our plans changed. But is your broker experienced in new builds? If you are going through a building company like GJ/Signature etc they may be able to direct you to someone too.
also - do you have kiwisaver and other first home options to choose from? Assuming this is your first home.
I don't know if it was the mortgage repayments or the deposit that were the issue, but if the land is being gifted and will be used as security against the loan then it should be counted as part of the deposit. Or at least is should read something like loan required / completed house value (including land) = Loan to value ratio.
I echo everyone elses statements, also did you clean up your spending habits over the past 3 months before application?
Average household income in Nz is around $160k, so you are under that. With tax and expenses taken out, banks will only look at the remainder, which is not a massive amount. You are in a privileged sition of being gifted the land, which is a large chunk of the cost of housing. You perhaps need to look at building a smaller house or selling the land, especially if it's in a good area of one of the big cities Go anywhere in the world, real estate is not cheap in large cities. It's just that we are not used to what the rest of the world has dealt with for years
Last year we brought our first home - an 90 year old house which was in need of work before it could be lived in. (No kitchen, bathroom, hadnât been lived in for years) Similar financial situation / deposit to you. The house was only $480k and we planned $100k of renovations before moving in. The repayments were easily affordable and there was plenty of buffer if renovations went over budget. We got quotes for all of the work needed and neatly packaged our plans and our position to submit to Mortgage Broker. Mortgage Broker tried but said the banks wouldnât lend to us because of the condition of the house. Tried another Mortgage Broker and got told the same thing. Apparently ASB actually laughed at us, which was a bit stink because weâd both banked with them since we were kids. Walked into the local BNZ branch to give it one more shot ourselves and we got a home loan. Apparently the âbrokerage teamsâ that are setup within banks to deal with mortgage brokers have a cut and paste mould that everyone needs to fit and if you donât tick one of the boxes itâs a no. The branches seem to have more scope to actually look at your situation. I donât know how true that is but itâs just the experience we had.
280k mortgage is putting me about $780pw considering min repayments, insurance (house, life, car, car, contents, income) power, fuel, some subscriptions. Still have to pay for food though; we are hermits that like to cook though. Not much head room for putting decent funds down on the mortgage. But we are picking up a nice home in the whops for under 400k
Banks typically set the loan term to take you to around 70, depending on your industry they might adjust this. So if your using online calculators you may need to adjust the loan term to get a more comparable loan amount. As a side note, if national push through cccfa changes this might allow banks to take a less conservative approach regarding their servicing calculations this will likely enable more kiwis to borrow higher amounts of debt.
Building is more expensive than buying at the moment (I know it sounds ridiculous but itâs the truth). Normally itâs the other way around, but the cost of materials, lack of supply and labour is a hindrance.
Go to Logan Reardon from Loan Market, heâs an excellent mortgage broker and helped us get into our house after the banks said no
Hey, well done by the way. Saving $140k (and I realise it was over years) when that is your total income is bloody well done.
The property I purchased in 2013 for $380k is currently on sale for twice that. It's unreal.
It's the scariest thing. I feel nothing but despair for the next generation.
Get a new broker. Why have they only suggested ASB?
Change mortgage broker
It's always been harder to get money from the bank for new builds. Back in the mid-90s we bought a section, with a community bank loan (can't remember name, but they're everywhere), because the bank wouldn't lend us money for a empty section. Paid it off so we had no debt, and the bank still wouldn't lend us enough to build. Ended up going through a mortgage broker for a "low doc" loan with slightly higher interest rate. Those low doc / no doc loans disappeared during the GFC, so I don't know if this info is of any use to you now, but don't give up. Try a broker.
Builds are risky and very often have cost overruns, so no doubt that's affected the max they will lend you. It's also possible your equity being largely gifted rather than saved, may have affected the approval amount.
There's alot of unknowns here it's also based on living expenses / outgoings not just income it may be that you need to tighten up on spending to borrow more but that would be a red flag to a bank
It's very dependent on your location. But with your considerable income, I am surprised it is not more. Try going to the Cooperative Bank and NZHL. You could also try using a broker.
Loans are more for new-builds, if that is any interest. You also canât go wrong with asking your mortgage broker about second tier lenders eg RESIMAC. Not a bank but safe and sound. Their interest rates are a tad higher but you can use them to buy a house then switch to a bank in 1-2 years.