How much do you need to earn to get a home loan?

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Photo: RNZ / Nate McKinnon

First-home buyers generally need to be earning at least $100,000 per year to get into the housing market.

Data from CoreLogic shows that the median price paid by first-home buyers across April and May was $688,000.

According to the mortgagerates.co.nz calculator, to borrow 80 percent of that amount, an individual would normally need to be earning about $100,000 if they had one car but few other expenses.

A couple would need roughly $124,000 if they had two cars and no children.

A couple with two cars and two children, but no childcare expenses, would need to earn closer to $140,000 a year.

An individual wanting to borrow $800,000 might need income of nearly $150,000 and a couple with two children might need closer to $180,000.

Squirrel chief executive David Cunningham said while individual circumstances would affect the final amount that could be borrowed, the figures were a good ballpark.

Jeremy Andrews, of Key Mortgages, said there could sometimes be tens or even hundreds of thousands of dollars’ difference in the maximum that different lenders would approve, depending on the type of income someone earnt, their outgoings and the type of property they were buying.

He said if someone was buying a three-bedroom property, some banks would allow a borrower to include the income from two boarders to show they could afford the repayments.

He said he had had a client who was single approved for a mortgage of more than $500,000 on an $85,000 income with boarders.

A couple might need to be earning twice that to be approved for the same amount, he said, particularly if they had childcare expenses or other debt,

Cunningham said applications would be tested against the bank’s test rates, which were usually significantly higher than the rates being charged.

Glen McLeod of Edge Mortgages said couples often had less borrowing power on the same annual income as an individual because they had more expenses to cover – twice the food and more power and transport bills, for example.

He said things like consumer debt and credit cards could also limit how much people could borrow on any set income.

New debt-to-income ratios had also put a cap on how large debts could be compared to household incomes. Owner-occupiers could not have debt of more than six times their household income, including other debts such as student loans.

McLeod said that had not limited any deals he had tried to do yet, but it would increasingly be a consideration.

Andrews said some of the most attractive options for first-home buyers were if they could qualify for a First Home Loan, which was available to single buyers earning up to $95,000 and couples or single parents earning up to $150,000.

Cunningham said banks had a “fairly decent” appetite for lending at the moment.

The market was weak and they had capacity for deals even for borrowers with smaller deposits.

“We’re getting good deals away – first-home buyers are a strong part of the market.

“Interest rates are likely to start falling. It’s a good time to be looking, if you can afford things now it probably gets better.”