Will your student loan affect a mortgage pre-approval?

2 MIN READ October 12, 2022
Getting into your first home can be both a challenging and exciting time. You’ve been saving hard and your finances might be looking pretty good. But you do have a pretty big student loan – will this affect your chances of getting pre-approved?

Now, this depends on what your situation is. We’ve put together two scenarios to help you get a better idea.

Scenario 1

If you have saved up for a deposit and you’ve got enough income to pay off both your student loan and your mortgage repayments, then it most likely won’t be an issue.

The repayments you make on your student loan will always be 12% of your income, regardless of how much you owe. So, if the lender can look at your income and see that you can service both repayments, they won’t consider this a roadblock.

Scenario 2

If you’ve managed to save up a deposit but your income isn’t quite enough to service your student loan as well as a mortgage, then you might run into some issues. Depending on how big your student loan is, paying it off first before you apply might be the way to go.

Student loans are considered ‘good debt’ because they don’t accrue interest, as long as you stay in New Zealand. It’s also generally considered that once you receive a qualification, your earning potential will increase.

Credit Card Debt

If you have credit card debt, this will have a bigger impact on your chances of getting a home loan pre-approval. Lenders will take into account the maximum amount you could owe on your card even if you don’t spend that amount.

For example, if you have a $10,000 limit on your credit card, but you’re only spending around $1,000 on it each month, the bank will still consider the $10,000 as the amount that you wouldn’t be able to put towards a mortgage.

If you’re looking to get a pre-approval sorted soon, reach out to our friendly mortgage team! They can give you advice on what the best move is for your situation.

Share this article

Talk to us today

0800 700 699

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Are you ready to get started?

Fill out your details below and someone from our friendly team will be in touch soon.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.