Does a student loan affect getting a mortgage in NZ?

Yes. A student loan reduces how much a bank will lend you. Not because of what you owe, but because of the repayment that comes out of every pay. First home buyers ask me this more than almost anything else, so here’s exactly how it works and what you can do about it.

Banks look at the repayment, not the balance

With most debts, the balance matters. A student loan is different. Your repayment is set by your income, not by how much you owe. Owe $5,000 or $80,000 and the deduction from your pay is the same.

When a bank works out what you can afford, it starts with your income, takes off tax and living costs, then subtracts your commitments. Your student loan repayment is one of those commitments.

How the repayment is calculated

If you earn salary or wages above the repayment threshold, IRD deducts 12% of every dollar over the threshold. The threshold is $24,128 a year (2026/27).

Gross income	Annual repayment	Monthly
$60,000	$4,305	~$359
$80,000	$6,705	~$559
$100,000	$9,105	~$759
$120,000	$11,505	~$959

As a rough guide, every $100 a month in repayments cuts borrowing power by around $15,000. So a $559 monthly student loan repayment can reduce what you can borrow by roughly $80,000.

If you’re self-employed, the repayment is based on your net income and paid through your tax, but banks still allow for it.

Three ways to reduce the impact

1. Pay it off with savings

If the balance is small, clearing it before you apply removes the repayment entirely. Losing a few thousand dollars of deposit often adds far more to what you can borrow. Run the numbers both ways first.

2. Refinance it into a lower repayment

This sounds odd, because you’d be swapping an interest-free loan for one that charges interest. But for a mortgage application, what matters is the monthly repayment.

A recent client had about $24,000 left on her student loan. On her income she was repaying about $1,175 a month. Moving it to a personal loan over a longer term cut that to just under $600 a month, and she could borrow about $70,000 more. It isn’t right for everyone, and the interest cost is real, so get advice before you do it.

3. Combine it with other debts

If you also have a car loan or credit card, consolidating everything into one lower repayment can make a big difference. How debt consolidation affects your mortgage.

Other quick wins

• Reduce credit card limits. Banks assume limits are fully used. More on credit cards and Afterpay.
• Use the right lender. Banks treat repayments, living costs and test rates differently.
• Look at low deposit options. A smaller deposit can still work with a student loan. Low deposit home loans.

Next steps

Check your numbers with the how much can I borrow calculator, then book a free chat. I’ll work out whether paying it off, refinancing or leaving it alone gets you the best result.

FAQ

Does a student loan stop me getting a mortgage?
No. It reduces how much you can borrow, but plenty of first home buyers get approved with a student loan.

Should I pay off my student loan before buying a house?
If it’s small, often yes. If it’s large, refinancing or leaving it can work better. It depends on your income and deposit.

Do banks care about the student loan balance?
Mostly no. They care about the repayment, which is based on your income.

Is a student loan counted if I’m overseas?
Yes. Overseas-based borrowers have fixed repayments and interest, and banks include those.