Mortgage
A loan from a bank or lender secured against the property, giving the lender the right to sell the property if the borrower defaults on repayments.
What is a Mortgage?
A mortgage is the most common way New Zealanders finance a property purchase. The bank lends you the money to buy the property and registers a mortgage interest on the certificate of title. This means the bank has a legal claim on the property — if you stop making repayments, the bank can ultimately sell the property to recover its money (known as a mortgagee sale).
In New Zealand, most banks require a deposit of at least 20% of the purchase price for owner-occupiers. First-home buyers may qualify for a lower deposit (as low as 5-10%) under certain conditions, including through the Kainga Ora First Home Loan scheme.
Mortgages come in various structures: fixed rate (interest rate locked for a set period), floating rate (rate can change at any time), and split structures (part fixed, part floating). Most New Zealand borrowers use a mix of fixed-rate terms to manage interest rate risk.
Why It Matters for Due Diligence
Getting pre-approval from your bank before you start house hunting is strongly recommended. Pre-approval gives you confidence about your budget and strengthens your offer in the eyes of sellers.
Be aware that pre-approval is not the same as final approval. The bank will still need to assess the specific property (including a valuation) before confirming finance. Include a finance condition in your sale and purchase agreement to protect yourself if the bank declines the specific property.
How to Check
Talk to your bank or a mortgage broker early in the buying process. Get pre-approved so you know your budget. When you find a property, your bank will assess it (and may require a registered valuation). Your lawyer will manage the mortgage documentation at settlement, including registering the bank's interest on the title.
Frequently Asked Questions
How much deposit do I need in New Zealand?
Most banks require at least 20% for owner-occupiers. First-home buyers may qualify for lower deposits (5-10%) through schemes like the Kainga Ora First Home Loan. A larger deposit usually means better interest rates.
Should I use a mortgage broker?
A mortgage broker can compare offers from multiple lenders and help you find the best deal. They're free for the borrower (the bank pays their commission). They're particularly useful if you have a complex financial situation or are a first-home buyer.
Related Terms
Deposit
GlossaryAn upfront payment made by the buyer when purchasing a property, typically 20% of the purchase price, held in trust until settlement.
Settlement
GlossaryThe day ownership of a property officially transfers from the seller to the buyer and the purchase price is paid in full.
Sale and Purchase Agreement
GlossaryThe legally binding contract between buyer and seller that sets out all the terms and conditions for a property transaction in New Zealand.
Registered Interest
GlossaryAny right or claim recorded on the property's certificate of title, such as a mortgage, easement, covenant, or caveat.
Lien
GlossaryA legal claim registered against a property as security for an unpaid debt, preventing the property from being sold or transferred until the debt is settled.
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