Buying a House on One Income

How lenders work out what one income can borrow

Two tests apply, and you need to pass both.

The debt-to-income limit. The Reserve Bank restricts how much lending banks can do above six times a borrower's gross income for an owner-occupied home. On a $90,000 salary that's around $540,000 of total debt, including any car loan and credit card limits. Read more about debt-to-income limits.The affordability test. The lender takes your income after tax, subtracts living costs and other commitments, and checks you could meet repayments at a test rate set above the real one. For a single borrower this is often the tighter test, because your living costs aren't shared.

Try our borrowing power calculator for a rough figure. It's an estimate. A real assessment depends on the lender.

Income that counts beyond your salary

• Regular overtime, allowances and bonuses, usually where there's a track record.
• A second job held for some months.
• Working for Families tax credits and child support, with many lenders.
• Boarder or flatmate income, within limits. See boarder income and home loans.
• Rent from a self-contained flat or minor dwelling on the property.

Lenders treat each of these differently. One may count all of your overtime and another half of it. On one income that difference can be tens of thousands of dollars of borrowing.

What moves the numbers most

1. Clear small debts. A car loan repayment can cut your borrowing by far more than the debt itself. Paying it off first often beats adding the same money to the deposit.
2. Cut credit limits. Lenders count the limit on a credit card, not the balance.
3. Close buy-now-pay-later accounts. They read as ongoing commitments.
4. A bigger deposit. Borrowing less matters most where income is the constraint. Gifts and KiwiSaver both help.
5. Look at different property types. A unit or townhouse may fit where a standalone house doesn't.

Help that's aimed at you

The Kāinga Ora First Home Loan has an income cap for single buyers and a higher one for a single buyer with dependants, and needs a 5% deposit. If a parent can back you, a family guarantee can remove the deposit hurdle, though you still need to afford the loan yourself.

Protect the one income

With two incomes, one can cover a gap. With one, an illness or redundancy stops everything. Before you buy, build a buffer of a few months' repayments if you can, and get advice on income protection and life cover. It isn't the exciting part of buying a house, but on one income it matters.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.