The Mortgage “Sleep Test”: Do you pass?

How much is too much? The definition of an acceptable sized home loan is ever changing. We believe there is a whole range of factors to consider when deciding what’s best for you. 

Interest Rates. If interest rates rose to 7% would you be able to live comfortably? How about if interest rates were 8.5%? Lenders often use their own ‘mortgage stress test’ which calculates your ability to make repayments should interest rates rise. But it can be a good idea to do your own checks.

Future Plans. Plans like travelling, starting a business or having a baby can have a big impact on your finances. Having the right mortgage structure in place can allow flexibility for some future changes – including going interest-only, offsetting and putting a proportion on floating or revolving credit.

Retirement. When do you plan to retire and how does this fit into your mortgage plan? Recent figures show that 28 percent of mortgages in New Zealand are held by those 55 years and older with an average mortgage of $321,000. It is important to think about when you need to be debt free by, and adjust your repayments accordingly.

Back up plans. Savings and other assets are all great to have alongside property, but using them as a back-up plan usually offers only a short-term solution. It would also have huge potential for financial setbacks. Are you covered for any unexpected bumps in the road?

Do you pass the test? If your mortgage has got you worried, we can help to structure your mortgage to fit in with life changes, help you pay off your mortgage faster, and ensure you’re well protected for the future - so you can sleep well at night.


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