The mortgage snapshot is a borrowing power calculator. It is more complicated than a repayment calculator which is simpler. This takes into account your personal situation such as how many dependents you have, how much debt you have, how much income you are earning, and your current mortgage and current equity position. Therefore it takes longer to complete and has many more inputs to fill out.

Warning: an online mortgage calculator will never be as accurate as a complete application review.

When building it we gathered information from the five major banks in New Zealand and compiled it. The results are not specific to one bank or lender but represent a holistic market estimate.

Our free calculator takes just 90 seconds to complete online – find your answers here by using the mortgage snapshot.

Scroll down to find links to calculators for borrowing power from each bank.

You know how to calculate how much interest you would have to pay – if not please reread further above. Now, we need to include paying off the principal (ie actually paying your mortgage off). In New Zealand, people usually choose a table loan – this means that your monthly payments will stay the same over the life of your loan. If you are looking for ways to reduce your repayments to increase your cash flow book a 10-minute call with someone from our team here.

At the beginning of the loan, you pay mostly interest. As time goes on, your mortgage balance decreases, so you will pay less and less interest. Towards the end of the mortgage, most money is going towards paying off your principal.

To calculate this you would use an amortization table. This is a table that recalculates your remaining mortgage balance after every payment. If you have a 30-year loan with weekly payments your table would have 30×52=1,560 rows! This is required as every repayment is unique in the amount of principal vs interest repaid.

Because of the complexity, I would suggest using either excel or google sheets to build an amortization table. Or just use an online calculator… like the one below! If you are determined to DIY your calculation here is a 22-minute youtube video that runs through how to build one in google sheets.

How much will the bank lend me? This is the hottest question out there. To work this out we need to work backwards. The first thing to understand is that banks want you to be able to pay them back and not default on your home loans.

Step one: calculating your available income.

The first thing banks calculate is how much you can afford to spend on your mortgage, they call this amount your Uncommitted Monthly Income (UMI). Essentially it’s how much money you have left each month after paying tax and for essentials like; insurance, food, clothes, transport, electricity, and other home loans. You can guesstimate this by doing your own budget (make sure you exclude any costs that will disappear like your Rent if you are buying a home).

Say your family earns $9,000 per month after tax. You subtract your expenses and you are left with $5,000 of uncommitted income each month (UMI).

Step two: what interest rate does the bank use to calculate affordability.

Banks do not calculate affordability/borrowing power using your actual interest rate. At the time of writing, interest rates were around 2.5%, but the banks are using ‘affordability test rates’ of between 5.5% to 6.5% (approximately). Note these change frequently and are different from bank to bank – speak to an adviser to see which bank would lend you the most money.

We take our example uncommitted monthly income (UMI) of $5,000 and multiply by 12 (there are 12 months in a year) to get an annual uncommitted income of $60,000. We then take our $60,000 and divide it by our test rate of 6.1%.

$60,000 / 0.061 = $983,606. This is approximately our example families borrowing power.

WAIT! This is only your borrowing power from a servicing or income perspective. The other part of the equation is having a big enough deposit. The bank will lower your borrowing power to whichever number is lower. For example, if our family was required to have a 20% deposit, and they had $150,000 to use they could only borrow $600,000. Meaning they could buy a \$750,000 house using a 20% \$150,000 deposit – even though their income would have allowed them to borrow up to \$983,606.