“How much can I borrow?” is often the first question people ask when they start thinking about buying or upgrading their home, or investing in property.
It sounds simple, but the answer is rarely just a number on a calculator. In reality, your borrowing capacity is shaped by a mix of income, expenses, your credit history and lending rules.
Understanding how lenders assess borrowing power can help you make better decisions and avoid disappointment later.
At a high level, lenders assess three core things.
In terms of equity, this is where ‘Loan to Value Ratio’ (LVR) rules come in. LVR measures how much you’re borrowing compared to the value of the house. Typically, the lower your LVR the stronger your financial position and less risk for the lender.
It is often the nuances of your situation that may dictate your borrowing capacity and the terms of your loan, as these three case studies demonstrate.
Let’s look at Sarah and Tom, a professional couple in their early 30s living in Auckland. Their combined income is $180,000 and they have a deposit of $160,000 available through a mix of savings and KiwiSaver. They were looking at homes in the $800,000 to $1,000,000 price range, so were seeking approval to borrow up to $840,000 to purchase their first home.
On paper, this looks straightforward. From a deposit and income perspective, this would be well within bank policy.
However, when we dove a bit deeper into their finances, things weren’t quite as clear cut. They had two outstanding car loans, ongoing student loan repayments, credit cards with limits totalling $20,000 and a number of subscriptions, which had a negative impact on loan services. Once all verified expenses are factored in, the bank was only comfortable lending $750,000.
The result was not a rejection – but it did serve as a reality check.
We spent time with Sarah and Tom working through a budget and how to get their debt down to a manageable level so that it would have less of an impact on loan serviceability. On our advice, Sarah and Tom went away and spent the next few months focused on paying down debt, lowering their credit card limits and reducing their discretionary spending.
Four months later, we helped Sarah and Tom with a new application and they were pre-approved for a higher lending amount, which gave them the flexibility to look at homes within their preferred locations and price bracket.
The lesson is clear. High income helps, but your outstanding liability and ability to service a loan matter just as much.
James and Katie are senior professionals in their early 40s with a combined household income of $340,000. They own a home valued at $2.1 million with an outstanding mortgage of $450,000. With their family needs evolving, they are looking to upgrade and have been considering homes priced between $2.7 million and $3.2 million.
With limited stock available in their preferred suburbs and strong buyer competition, their main concern was timing. Selling first would put them in a strong financial position, but it would also leave them under pressure to secure a new home quickly in a tight market.
From a balance sheet perspective, the numbers stacked up well. Selling their existing home would release substantial equity and provide a significant deposit, but the amount of equity held in their home opened options beyond a simple sell-and-buy approach.
James and Katie had a number of ongoing commitments, including private schooling, higher credit card limits, and vehicle finance. However, their high incomes and well-managed finances meant that the bank was comfortable taking a broader view and placed more emphasis on cashflow resilience, repayment buffers, and how the debt would be structured, rather than focusing solely on headline income.
In this case, we were able to secure James and Katie pre-approval for the required borrowing, with flexibility built in. This gave them the option of whether to sell first and then buy, or to purchase their new home using the equity they had in their current home and then reducing their debt once they subsequently sold their existing property. Having flexibility built in helped remove pressure from the process and allowed Katie and James to act quickly and confidently when the right property became available.
Throughout this process, our role was not about pushing borrowing to the maximum. It was about structuring the lending to give James and Katie control over timing, risk, and repayments. With the right structure in place, they were able to move forward without feeling forced into a rushed sale or purchase.
This scenario highlights a key point for higher-income households. At the premium end of the market, the most effective borrowing strategies are less about stretching limits and more about using income and equity thoughtfully to create choice, flexibility, and confidence.
Mark is a Wellington-based investor with two existing rental properties and a salary of $160,000. Both properties have performed well over time, and rising values mean he has built up solid equity. He is looking to purchase a third investment property for $700,000.
As an investor, Mark understands he needs a 30 percent deposit, which he can comfortably access through equity. The challenge arises when serviceability is assessed. Rental income is typically discounted, with lenders often taking into account around 75 percent of the gross rent. At the same time, Mark’s existing loans are assessed at higher bank loan test interest rates.
Initially, one bank indicates that Mark’s borrowing capacity is limited. While his asset position is strong, the lender is concerned about risk and income sustainability if interest rates rise or rental income fluctuates.
However, by reviewing Mark’s portfolio in detail, we identified several options. We noted that one property was slightly under-rented, so suggested Mark increase the rent to market level to improve serviceability. We also suggested that Mark broaden his property search to encompass areas such as Masterton with lower property prices but higher rental yields and forecast capital growth opportunities.
Using this approach, we were able to submit an application to an alternative bank, which took a more favourable view of Mark’s income mix and rental history.
This case study highlights the role of advice in investment lending. While lending rules are consistent across the market, banks apply them differently, particularly when it comes to rental shading and portfolio investors.
For investors, borrowing capacity is not just about how many properties you own. It is about how those properties are structured, how income is presented, and choosing a lender whose policy matches your strategy, which is where the value of good advice really pays dividends.
Borrowing power is not just about what you earn or how much you have saved. It is about how your entire financial picture looks through a lender’s lens.
This is why online calculators often overestimate. They provide a rough indication, but these can’t assess your spending habits, debt structure, or how a particular bank interprets policy.
At Threefold, we help clients understand their true borrowing position early. That clarity allows you to plan, adjust, and move forward with confidence rather than relying on guesswork.
Ultimately, if you are asking “how much can I borrow?”, the better question to ask is “how do I put myself in the strongest possible position to borrow well?”. That’s where we can help.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.