Getting a mortgage – how much can I borrow?

If you are looking at buying a home, you’re probably wondering how much you can afford to borrow.

A good place to start is the “rule of thumb” of using your household income to point you in the right direction.

First off, a bit of background….

You may have heard in the media commentary on median multiples.

The median multiple is a measure of housing affordability. It is calculated by dividing the median house price with the median household income. A median multiple of 3 times or less is considered affordable. For example, if you had a household income of $140,000, you should comfortably be able to afford a mortgage of $420,000.

New Zealand, with a median multiple of 6.83, has a housing market which is technically very unaffordable however with historically low interest rates people are comfortable paying more to own their own homes.

​The broad rule

Our Mortgage team often find that they can get finance for a new home at around 5 – 6 times household income. So, for the same household income of $140,000 and a multiple of 5 times, this client could borrow $700,000.

​Other factors

As Mortgage Specialists, it is our job to help clients move into their dream homes and simplify the whole home loan process. Here are some things that influence how much you can borrow:

  • The type of income you have – if you are self-employed or your income is commission or overtime based the broad rule would not apply
  • Dependents – banks will attribute specific ‘standard’ living expenses for every child in your care
  • Short term debts – credit card limits, car loans and student loans all negatively impact your ability to borrow
  • Lifestyle living expenses – expensive hobbies such as motorsport or pastimes such as overseas holidays and regular digital subscriptions will be factored in by the banks 
  • Education costs – private school fees will definitely be considered by lenders

​What works best

In our experience we find our clients have a pretty good idea of how much they can realistically afford to commit to their mortgage every fortnight or month. Once we know this, we just need to know how quickly you want to pay your mortgage off (i.e. anything from 1 – 30 years) and we can tell you how much you can borrow.  

This is a great way to work out how much you should borrow as everyone’s circumstances are different. If you are wondering how much you can borrow, we strongly encourage you to get in touch with us early in the process so we can ensure your finances are in the best shape they can be before formally applying to a lender. Feel free to contact us here.  


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