Imagine you’ve just received a promotion at work – new responsibilities, fancy new job title and more cash. You’re now on $85,000 a year!

Oh, the possibilities! A home loan?! Maybe now you can truly consider buying a house! If you’re in Auckland then you better think again buddy. Get ready for a reality check…

$85,000 income is not enough – in Auckland

When it comes to high LVR lending for mortgages (that is, you want to borrow with less than 20% deposit) you will face a tough affordability test. If you’re in this category then your debt servicing needs to be super strong, which makes sense – there’s sod all equity to lean on so your income better be awesome.

Now, my ASB/ANZ/BNZ/Westpac mortgage calculators tell me that you would not pass their affordability test if:

  • You’re a single person
  • Earning $85,000 per year
  • Wanting to buy a below average house in Auckland (worth $650,000)
  • With $65,000 to put in
  • And no other debts to speak of (not even an unused credit card)

How frustrating is that? You earn good dough, you’ve probably worked out that the repayments on the above loan would fit your budget, but you’ll be stuck renting because you ‘don’t earn enough’.

The good news

It doesn’t take much more income to transform your position from No to Go. Another $30,000 of annual gross income would do it. Time to find a second job, buddy up with a mate or convince your partner?

This is why most of our clients are couples or high earning individuals with the makings of a solid career already under their belts. These people can show a solid track record of saving (perhaps through KiwiSaver and their bank account), they have long term jobs with a stable work history and their bank statements show good behaviour. Some will have received bonuses or commissions over the previous couple of years or even have company vehicles.

If that doesn’t sound like you, then you’ll need come to the table with a 20% deposit or a parent who is capable of being a guarantor to even be given a second glance by the bank.

If any of these options sound like a possibility for you, we can talk you through how to make it work in reality. If, you’re still a wee way off any of those possibilities, we’ve got some solid advice on how to work your way towards your goal of home ownership – First Home Buyers: Get your ducks in a row.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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