PHOTO: FILE
First-time home buyers typically need to earn at least $100,000 per year to enter the housing market.
CoreLogic data reveals that the median price paid by first-time buyers in April and May was $688,000.
According to the mortgagerates.co.nz calculator, to borrow 80% of that amount, an individual would generally need to earn about $100,000 annually if they had one car and few other expenses.
A couple would need approximately $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 annually.
An individual wanting to borrow $800,000 might require an income of nearly $150,000, while a couple with two children might need around $180,000.
Squirrel chief executive David Cunningham noted that while individual circumstances affect the final borrowing amount, these figures provide a good estimate.
Jeremy Andrews of Key Mortgages mentioned that the maximum amount different lenders approve can vary significantly, sometimes by tens or hundreds of thousands of dollars, depending on income type, expenses, and property type.
For example, when buying a three-bedroom property, some banks may allow a borrower to include income from two boarders to demonstrate affordability.
He cited a client who was approved for a mortgage of over $500,000 on an $85,000 income with boarders. A couple might need to earn twice that amount to be approved for the same mortgage, especially if they have childcare expenses or other debts.
Cunningham added that applications would be tested against the bank’s higher test rates.
Glen McLeod of Edge Mortgages explained that couples often have less borrowing power on the same annual income as an individual due to higher expenses like food, power, and transport. Consumer debt and credit cards can also limit borrowing capacity.
New debt-to-income ratios now cap debt at six times the household income, including other debts such as student loans. McLeod said this hasn’t limited deals yet but will increasingly be a factor.
Andrews highlighted that some attractive options for first-time buyers include qualifying for a First Home Loan, available to single buyers earning up to $95,000 and couples or single parents earning up to $150,000.
Cunningham noted that banks currently have a “fairly decent” appetite for lending, with capacity for deals even for borrowers with smaller deposits.
“The market is weak, and they have room for deals. First-time buyers are a strong part of the market. Interest rates are likely to fall, so it’s a good time to look. If you can afford it now, it will probably get better.”
SOURCE: RNZ