Question 1

How do banks calculate borrowing power in New Zealand?

Accepted Answer

Banks assess your borrowing power by looking at your gross income, living expenses, existing debts, and credit card limits. They calculate your net surplus income after all commitments and use that to determine the maximum loan repayment you can afford. The loan amount is then derived from that repayment figure using a stress-tested interest rate.

Question 2

What is the stress test rate?

Accepted Answer

New Zealand banks are required by APRA to assess your ability to repay at an interest rate 3 percentage points above the actual loan rate. For example, if the loan rate is 6.04%, the bank tests your affordability at 9.04%. This buffer protects borrowers if rates rise.

Question 3

Does my credit card limit affect borrowing?

Accepted Answer

Yes. Banks assess 3% of your total credit card limit as a monthly commitment, regardless of your current balance. A $20,000 credit limit reduces your borrowing power by approximately $600/month. Closing unused cards or reducing limits can significantly increase how much you can borrow.

Question 4

Can I borrow more with a partner?

Accepted Answer

Generally yes. A joint application combines both incomes, which increases the total net surplus available for loan repayments. However, shared living expenses and any debts held by your partner are also factored in. Tax is calculated individually for each person using New Zealand tax brackets.

Question 5

Is this estimate accurate?

Accepted Answer

This calculator provides a reasonable estimate based on standard New Zealand lending criteria, including APRA stress-test buffers and current tax brackets. Actual borrowing power varies between lenders and depends on factors like employment type, credit history, dependants, and specific bank policies. Use this as a starting guide and speak with a mortgage broker for a precise figure.

Borrowing Power Calculator New Zealand 2026

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