What Banks Look for When Approving Your Home Loan
Applying for a home loan can feel intimidating — especially if you’re a first-home buyer. Many Kiwis assume mortgage approval is all about income and deposit size, but banks look at a much wider financial picture before saying yes.
Understanding what lenders assess can help you prepare in advance, improve your chances of approval, and potentially secure better loan terms. Here’s what banks in New Zealand really look for when approving a home loan in 2025.
1. Your Income and Employment Stability
Banks want confidence that you can comfortably service your mortgage long-term. They’ll review:
Your gross income (salary, wages, self-employed income, or contract income)
How stable your employment is
Whether your income is regular and sustainable
Permanent employment is generally viewed more favourably, but contractors and self-employed borrowers can still be approved — often with additional documentation. The key factor is consistency over time.
2. Your Spending Habits
This is where many buyers get caught out. Banks closely examine your recent bank statements to see how you manage money day-to-day.
They’ll look for:
Discretionary spending patterns
Subscriptions and recurring expenses
Gambling or high-risk transactions
Whether you regularly live right up to your limit
You don’t need to live like a monk, but showing responsible spending — and the ability to save — goes a long way toward approval.
3. Existing Debts and Financial Commitments
Credit cards, personal loans, car finance, and buy-now-pay-later accounts all reduce your borrowing power. Even unused credit card limits can impact how much a bank will lend.
Before applying for a mortgage, it often helps to:
Pay down high-interest debt
Reduce or close unused credit facilities
Avoid taking on new finance
Lower debt means lower risk in the bank’s eyes — and more borrowing capacity for you.
4. Your Deposit and Savings History
A larger deposit generally improves your chances of approval, but banks also care about how the deposit was built.
They like to see:
Genuine savings over time
KiwiSaver contributions
Clear documentation for gifts or family assistance
This shows financial discipline and reduces the lender’s risk. Even with low-deposit lending options available, a strong savings history makes a big difference.
5. Your Credit History
Banks will check your credit report to see how you’ve managed past financial commitments. Late payments, defaults, or missed bills can raise red flags — even if they happened years ago.
The good news? Minor issues don’t always mean automatic decline, especially if there’s a clear explanation and improved behaviour since.
Final Thoughts
Mortgage approval isn’t about being “perfect” — it’s about showing lenders that you’re financially reliable, prepared, and realistic.
By understanding what banks look for — income stability, responsible spending, manageable debt, solid savings, and a clean credit history — you can put yourself in the strongest possible position before applying.
A mortgage adviser can review your situation, highlight any red flags early, and help you present your application in the best possible light — often improving your chances of approval and the deal you receive.
Because when you know what the banks are looking for, you can plan ahead — and buy with confidence.