DTI in NZ: How Debt-to-Income Caps Change Your Borrowing Power

The formula

DTI = total debt ÷ gross annual household income. Total debt includes the new mortgage plus existing mortgages, personal and car loans, student loans and — importantly — your credit card limits, whether you use them or not.

Quick worked examples

Remember these caps apply to total debt. A $150k household with a $100k existing loan and $20k of card limits has $780k of new-borrowing headroom under the cap, not $900k.

The escape hatches

• Speed limits: banks may write a portion of new lending (20% owner-occupier, 5% investor) above the caps. These slots go to the strongest files.
• New builds are exempt from both DTI and LVR restrictions — one reason new-build lending is structurally easier.
• Other exemptions include refinancing like-for-like, bridging, and some remediation lending.

DTI vs servicing: which one limits you?

DTI is a hard ceiling; servicing (test-rate affordability) is a separate, usually tighter constraint. When test rates are high, servicing binds first and DTI is academic for many borrowers. As rates fall, servicing loosens — and DTI increasingly becomes the binding limit, especially for investors. This is why 2026 borrowing feels different from 2023: the constraint that stops you has shifted.

Practical moves to improve your DTI position

1. Cancel or cut unused credit card and overdraft limits — they count in full.
2. Clear small consumer debts before applying; a $12k car loan can block $12k of home lending.
3. Consider new builds if you're near the cap — the exemption is significant.
4. Structure investor purchases with income and rent assessed correctly; lender treatment differs.

Frequently asked questions

Do credit card limits really count in my DTI?

Yes — the assessed debt typically includes your limits, not your balances, because you could draw them at any time. Reducing limits before applying is one of the easiest DTI wins.

Is rental income counted in DTI for investors?

Rental income counts toward household income in the DTI calculation, though banks typically scale it. The investor cap is 7× rather than 6×.

Can a bank lend above the DTI cap?

Yes, within RBNZ speed limits — banks can write a limited share of new lending above the caps. Strong applications compete for those slots.

Do DTI caps apply to new builds?

No — new-build lending is exempt from both DTI and LVR restrictions, which makes new builds a genuine strategy for capped borrowers.