The Big Move: Getting set for a mortgage in New Zealand after living overseas

Housing Market Written by John Bolton, Apr 19 2022
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After a brutal 708 days of border closures and MIQ lotteries, New Zealand finally began its grand reopening to the world at midnight on Friday 4th March, 2022 – welcoming returning Kiwis MIQ-free, vaccinated or not, from all over the globe.

It was a welcome shift (to say the least) for those eager to lock in reunions with family and friends, after waiting out the last two years of the pandemic in far-flung corners of the world. And for others still, it was the green light they needed to kick plans for a more permanent move back to New Zealand into gear.

If you’re part of this latter group, and now thinking about buying property in New Zealand, you’re probably going to have big some questions about the process of getting a mortgage. Will lenders even look at if you don’t have recent financial history with a New Zealand bank? Should you start the process before you land?

But don’t worry, we’ve got you! Here we’ve outlined the key things that you need to consider, and get in order, to be ready to apply for a mortgage in New Zealand after living overseas.

1. The single most important thing you need to do is secure (a.k.a. de-risk) your income.

When it comes to a mortgage, your borrowing power is a function of two things: income (or your ability to service the debt) and your deposit.

For many returning Kiwis, like those coming back from the UK or US for example, you’ll have the advantage of strong foreign income on your side – meaning you’ll probably have a pretty healthy deposit saved up. And that’s fantastic.

When it comes to the other side of the equation – servicing – lenders are evaluating your ongoing ability to afford the loan, which means they’re looking for evidence of reliable, secure income.  

So, it makes sense that getting yourself set up with work in New Zealand is probably the single most important thing you can do to support your mortgage application.

Once you’ve got a job locked in, banks will ideally want to see evidence of an open bank account, where you’ve received (at least) your first pay before they’re willing to lend. In some instances, if you’ve got work lined up but you’re yet to start, you may be able to get a loan with a copy of your signed contract, including a confirmed start date.

On the flip side, if your servicing's a bit tighter, and you don't have a big deposit, lenders will probably want to see a few months’ bank history first.

With couples, it can often be the case that one partner has a job locked in before the move, and the other is planning to find work when they get here. If you can comfortably service the mortgage on that one secured income, that may be workable – otherwise it will be a tough sell.

There’s no single answer to suit every situation. If you can compensate for lower servicing with a bigger deposit (and you’ve got an awesome mortgage broker on your side) lenders may be able to offer some flexibility.

Something to note if you work for an overseas employer

If you’re planning to work for an overseas employer, that’s all good, but you’ll need to provide your bank with written confirmation that your company is a-okay with you working from New Zealand.

That’s because this can be a tricky arrangement for foreign companies, with a whole lot of tax implications – so lenders will want written proof that your employer is cool with the situation, so they can be sure of your ongoing ability to service the mortgage.

Something to note if you’re self-employed

Remember that lenders are going to come at any conversation with a potential borrower from the perspective of “what’s the level of risk here?”.

Looking at security of income – and your ongoing ability to service a mortgage – anyone who’s self-employed (and particularly start-ups) is going to look like a greater risk to the banks than someone working for a big, fancy, established corporate.  

That means you’re probably going to have to meet stricter requirements like fronting up with a bigger deposit (upwards of 20 per cent), and providing lots of financial information about your business.

While it may be tougher to get a mortgage application across the line if you‘re self-employed, it’s certainly not impossible – and working with a good mortgage broker is going to be key to helping you understand and mitigate the risks as the banks see them, to make it happen.

2. It’s not necessarily a problem if you don’t have recent bank history in New Zealand.

Like I said, proof of secure income is going to be the most important thing for any returning Kiwi wanting to get a mortgage. Beyond that, as long as you can provide three months’ recent bank history from the country you’ve been living in, that should do the trick.

If you’ve got a long history overseas, some lenders (not all) will want to take a look at your overseas credit record. Every lender approaches this a little differently – and not all of them bother with overseas credit scores – but it’s definitely something to be mindful of as you get yourself prepared.

3. It may or may not be a good idea to buy before you move.

It all depends on how soon you’re planning on making your return to New Zealand.

If the move is locked in for the near or immediate future, you’re better off waiting until you’re on the ground. But, if it’s a longer-term plan – something that’s going to happen in a year or two perhaps – and you’re just keen to get into the market, that could be a different story.

And there’s a few reasons for that…

You’ll need a much bigger deposit if you’re buying from offshore.

That’s because the assumption will always be that it’s an investment property, and that means you’ll need a deposit of at least 40 per cent on an existing home, or 30 per cent on a new build.

Compare that to 20 and 10 per cent, respectively, if you were in New Zealand and going to live in the property straight away – and it’s easy to see why it could be better to hold off until you’re here.

When you apply for a mortgage from overseas, your lender will be making their decision based on your overseas income.

Thinking back to my earlier point about the banks’ focus on security of income… If you get a loan, then rock up in New Zealand a few weeks later having given up the job that helped you get it, that’s not going to go down too well.

So, again, if you’re planning on making the move in the short term, you’ll be better off waiting until you’re in New Zealand (with work locked in) to avoid any unnecessary complications.

Lenders are hyper-conservative when dealing with overseas borrowers, which can make it really tough to meet servicing requirements.

It’s worth knowing that the banks factor in a whole lot of (BIG) buffers when they’re looking at any overseas borrower’s ability to service a mortgage, basing their calculations on:

  • Just 70 to 80 per cent of your total overseas income.
  • Just 60 per cent of potential rental income from the property – given that investment properties have recently lost their tax deductibility (unless it’s a new build of course)
  • A standard test interest rate of between 6.5 and 7 per cent, which is already significantly above New Zealand market rates.

Those buffers can be crippling when they all add up, so waiting until you’re back in the country (if you can) is going to make it a lot easier to meet a lender’s servicing requirements.

If you own properties overseas, with other mortgages to service, that’s going to make it harder to borrow even once you’re back in New Zealand – and it may be worth strongly considering selling these properties if you’re planning a permanent move home.

4. As always, chatting with a great mortgage broker is going to be key.

It sounds like a lot of hoops to jump through, but don’t lose heart. Every lender is different – banks vs. non-banks for example – and will have different requirements.

If you’re planning a move back to New Zealand, and are getting serious about buying property here, the best thing you can do is chat to a mortgage broker. They’ll be able to give you crucial guidance around what’s possible, and what’s not, and help you set a solid plan in place.

We can help. Have a chat to one of our advisers.