How to get a mortgage in 12 steps

It’s worth having a look at what’s available early on to figure out what you can realistically afford. To get started jump onto Trade Me Property and use the location, bedroom and property type filters to find properties that might suit your needs. Filter by price to get an idea of what they may cost. 

You’ll need 10-20% of the property’s price as a deposit, plus enough income to service the loan repayments in order to get a mortgage from a lender. Banks have their own serviceability requirements, but as a general rule your mortgage repayment should never exceed 30% of your pre-tax income. 

Use a mortgage calculator to work out what your deposit and mortgage repayments might be. 

Next, it’s time to find a lender. The largest cost of any home loan is interest so that should be your priority when searching. 

Don’t go with your bank by default, instead shop around for the best deal by either comparing lenders online or finding a mortgage broker to do the shopping around for you. A good mortgage broker will give you access to a number of lenders, advocate on your behalf with them and help you with your application. It’s worth considering major banks, smaller banks and non-bank lenders.

Don’t be afraid to speak to a few lenders to make sure you know what you’re signing up for when you get a mortgage. You could ask:

• What fees are charged? 

• Can I make extra repayments without incurring fees?

• If I buy a new home in a few years can I move my mortgage to that property? 

• If I repay my mortgage early what fees will I be charged? 

• What would be the total cost of my home loan?

As well as asking questions it may be worth negotiating with lenders. Ask them if they can offer a better interest rate or waive certain fees and you might be surprised how willing they are. 

Once you’ve chosen a lender they’ll be able to take a look at your finances and tell you whether you’re ready to buy a home and get a mortgage. If you are, great news! If not you may need to save more of a deposit or work on your budget. 

Lenders love to see genuine savings - that means money you’ve earnt that’s been put aside regularly to save for a deposit. They will look on these savings more favourably than gifts from parents or windfall gains when assessing your application. 

They’ll also assess your credit score, so it’s worth checking this before you apply. To improve it and make your application better it’s a good idea to pay off all your debt and create a detailed budget before applying. Remember your lender will want to look at three to six months of bank statements when assessing your application, so it’s a great idea to make sure your finances are looking amazing during that period - the more you save and the less you spend the better. 

Generally you’ll need 20% of the purchase price of the property as a deposit but there are exceptions. New build properties can often be purchased with a 10% deposit and first home buyers may be able to buy with as little as a 5% deposit if they are eligible for government assistance but keep in mind that these low deposit loans may come with higher fees.

You may also be able to withdraw from your KiwiSaver to help fund your deposit if you’ve been contributing for three years and are a first home buyer. 

Eligible buyers may be able to access government assistance to make it easier to save a deposit or get a home loan, such as the First Home Loan. This is a bank loan underwritten by Kāinga Ora that reduces the 10-20% deposit requirement to just 5%. As well as government assistance you may be able to get help from family if they’re willing (and able) to use their home as security and act as either a co-borrower or guarantor. This will enable you to buy with a much smaller deposit and avoid low equity loan fees. 

Before you sign a loan contract it’s a great idea to have a lawyer look over it to ensure you understand it, especially if it’s your first! You’ll also need a good property lawyer to check the property you purchase, look over the sale and purchase agreement and handle signing of key documents like the home loan documents.  

Once you’ve figured out your finances, saved your deposit, found a lawyer and gotten your ducks in a row, it’s time to apply for conditional approval with your lender. This isn’t formal approval, it’s just an indication from your lender that if nothing changes and they approve of the property you buy, they’ll lend you a certain amount. 

Generally you’ll need to provide the following during the application:

• Proof of income which may include payslips or financial statements prepared by an accountant if you work for yourself. 

• Proof of debt and outgoings which may include bank statements and statements on any credit cards, hire purchase agreements or personal loans. 

• Evidence of your deposit and KiwiSaver balance which is usually a bank statement and a written statement form your KiwiSaver provider. 

• Two forms of valid ID. 

• Proof of address. 

A mortgage broker can be a great help during this period as they can capture your financial details and help you make the applications. If you’re denied by one lender they can quickly repeat the process with another. 

Once you’ve got conditional approval you’re ready to start home shopping! Jump on Trade Me Property and get searching. 

At this stage you should be fine to make offers on any property that fits your budget and is not for sale via auction, although some mortgage brokers and lenders will have you run each property by them for approval or insert a financial due diligence clause into the sale and purchase agreement. 

If you’re buying via auction it’s a good idea to request formal approval before attending as auction sales are unconditional (meaning once the hammer falls you’re legally bound to purchase the property).

When you’re ready to make an offer on a home or to attend an auction, read our guide to making an offer and speak to your lawyer to make sure you understand the process. 

When your offer is accepted you and the vendor (seller) will sign a sale and purchase agreement that sets out the terms for the sale. You’ll pay a deposit to the vendor, usually 5-20% as soon as this is signed.

One of the key details in this contract is settlement day - the day when ownership of the property passes to you and your lawyer pays the balance of the property on your behalf using funds provided by your lender. Once payment is cleared, you’ll arrange handover of the keys and the documents. Generally it’s best not to arrange to move in on settlement day as there’s a lot that needs to happen. Generally 24 hours post-settlement is a safer bet. 

Read more about what happens on settlement day here.