Three things to know about the simplified borrowing rules


In December last year the borrowing rules for home loans were tightened. This led to a more vigorous home loan application process and lot of talk about what you may or may not be able to spend your money on in the lead up to applying for a home loan.

The good news is these rules have recently been simplified after a Government review found they were having some unintended impacts. Some borrowers were being declined for loans they previously might have had approved, others couldn’t borrow as much, and lenders were having to look at people’s spending much more closely than anticipated.

Here are three things you should know about the recent updates.

1. The way we look at spending has changed

The biggest change is to the way lenders look at ‘discretionary expenses’ when you apply for a home loan. This is what you spend money on once you’ve covered the necessities of life, like home loan payments or rent, food, clothing, and travel to work. We’re talking about things like dining out and entertainment.

We can now consider excluding these types of expenses when we’re checking if a loan is affordable for you, rather than using your recent spending habits as a gauge for how you’ll live as a borrower. As part of this, we look at which non-essential expenses you’re able and willing to cut, as people tend to reduce their spending once they have a mortgage. We also no longer need to consider savings and investments as expenses.

2. You can apply before you make changes to your spending

This means if you’re wanting to buy a new house or do up your existing one, you can apply now – you don’t need to wait until you’ve made cuts. We’ll still look at your spending from the past three months, but we’ll work with you to assess which of your current expenses may change once you have a loan.

If you choose to apply for a home loan with us, the BNZ website has more information about exactly what you should bring to your appointment.

3. You still need to be able to comfortably afford the loan

Of course, it’s still vitally important that you can afford to repay what you’re borrowing. We want you to enjoy owning and doing up your home without getting into financial difficulty.

But if you’re in a good position to borrow, there’s now one less hurdle to making your home ownership or renovation dreams a reality.


This article is solely for information purposes and is not intended to be advice with respect to any matter discussed in it. If you need help, please contact BNZ or your professional adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.

All home loans are subject to our lending criteria (including minimum equity requirements), terms and fees (including an establishment fee of up to $150).