How does it
all work?
Every term your bank uses, explained plainly. No jargon. Built for NZ home buyers.
Key Concepts
Loan-to-Value Ratio (LVR)
The percentage of a property's value you are borrowing. The RBNZ uses LVR limits to restrict high-LVR lending across the market.
Debt-to-Income Ratio (DTI)
Your total debt compared to your gross annual income. The RBNZ restricts high-DTI lending for owner-occupiers.
Official Cash Rate (OCR)
The Reserve Bank's benchmark interest rate, the primary lever that influences NZ mortgage rates.
Mortgage Stress Test
The interest rate banks use to test whether you can still afford repayments if rates rise, typically set well above the rate you will actually pay.
Fixed Rate Mortgage
An interest rate locked in for a set term, typically 6 months to 5 years, giving payment certainty during that period.
LIM Report
A Land Information Memorandum from the council, discloses known issues about a property's land, consents, and risk factors.
Mortgage Broker
An intermediary who shops your application across multiple lenders to find the best rate and structure for your situation.
Deposit
The upfront cash you contribute toward a property purchase, the larger it is, the less you need to borrow.
NZ Superannuation (NZ Super)
A government-funded pension paid to eligible NZ residents from age 65, regardless of income or assets.
KiwiSaver
NZ's government-backed retirement savings scheme. Contributions come from you, your employer, and the government.
Compound Interest
Interest earned on both your original savings and on the interest already accumulated. The earlier you start, the more powerful it becomes.
Core Lending
A bank's overall assessment of your ability to repay a loan, combining income, expenses, DTI, and the stress-tested rate.
The process of gradually repaying your mortgage through regular principal and interest payments over the loan term.
The portion of your property you actually own, the difference between its market value and what you still owe.
The percentage of your gross income spent on mortgage repayments, used by lenders and financial planners to assess borrowing sustainability.
Mortgage Products
A variable interest rate that moves with market conditions. No break fees, full flexibility, but typically the highest rate available.
The standard NZ home loan repayment structure, each payment covers both interest charged and part of the loan balance.
Repayments cover only the interest, the loan balance does not reduce during the interest-only period.
A flexible home loan that works like an overdraft, your salary reduces the balance daily, and you draw funds as needed.
The cost of exiting a fixed-rate mortgage before the term ends, can be substantial when rates have fallen since you fixed.
Replacing your current mortgage with a new one, either with your existing bank or a different lender, to get better terms.
Property & Legal
The council-assigned value of a property used for rating purposes, often lags behind actual market value.
The most straightforward form of land ownership in NZ, you own the land and everything on it outright.
A shared ownership structure common in NZ where multiple owners each lease the entire land from each other.
You own the building but lease the land beneath it from a landowner, typically a council, Iwi, or institution.
Ownership of a specific unit within a multi-unit development, including a share of common areas.
A professional inspection of a property's structural condition, essential before making an unconditional offer.
The legal process of transferring property ownership, handled by a property lawyer in NZ.
The day the sale completes, funds are transferred, title changes hands, and you receive the keys.
The management body for multi-unit buildings. All owners pay mandatory levies that can be substantial.
Lenders
A bank licensed by the RBNZ to take deposits and provide lending, the primary source of home loans in NZ.
A lender that is not a registered bank, typically used when mainstream banks decline an application. Rates are higher.
A arrangement where a family member uses their property as security to help a buyer access a mortgage or avoid LMI.
Costs & Ownership
Annual charges from your local council to fund infrastructure and services, calculated on your property's Capital Value.
The maximum your home insurance pays out, based on rebuild cost, not market value. Under-insurance is a major NZ risk.
A short-term loan that covers the gap when you buy a new property before your existing one has sold.
A conditional commitment from a bank stating how much they will lend you, subject to satisfactory valuation and final checks.
Retirement & Savings
A guideline for how much you can withdraw from retirement savings each year without running out of money.
KiwiSaver funds range from conservative (lower risk) to aggressive (higher risk). Your choice should match your age and goals.
Your employer must contribute at least 3% of your gross salary to your KiwiSaver account, on top of your own contributions.
The difference between what you need in retirement and what your savings plus NZ Super will provide.
How a large, unexpected sum of money (inheritance, business sale, lottery) can change your retirement timeline.