Mortgagee sales in NZ: how they work and how to buy one

I’m a mortgage adviser, not a lawyer. The legal steps below are a summary from law firm and Banking Ombudsman guides, so check them with your lawyer. The deposit example uses a $755,000 price and is illustrative.

People ask me about mortgagee sales for two reasons. Some want to buy one. Others are behind on their own mortgage and worried it’s heading this way.

I’ll cover both, starting with how a mortgagee sale works.

What happens in a mortgagee sale

The steps are set by the Property Law Act 2007:

1. The owner falls behind and the lender makes a demand.
2. The lender serves a section 119 notice giving the owner at least 20 working days to fix the default.
3. If it isn’t fixed, the lender can take possession, collect any rent and sell.
4. Under section 176, the lender must take reasonable care to get the best price reasonably obtainable at the time.

The 20 working days comes from law firm and Banking Ombudsman guides, so ask your lawyer to confirm the detail. Selling below market value isn’t a breach on its own, and the lender has no duty to put the owner first. That’s why I tell buyers not to bank on a bargain.

Mortgagee sale increase: how common are they right now?

More common than last year, but still well below the peak. Cotality counted 111 mortgagee sales in the June 2026 quarter, up from 74 in the March quarter. The 2009 peak was around 760 a quarter. Centrix data shows residential mortgage arrears at 1.27%, the lowest since 2023.

OneRoof, using a different method, had identified 313 mortgagee sales by late September 2026 (387 in all of 2025 and 238 in 2024), which puts this year on track to be the highest since 2020. That’s a real mortgagee sale increase, but the two counts aren’t comparable, so don’t compare numbers between providers. Higher interest rates are putting pressure on some owners, though arrears overall remain low.

How to buy at a mortgagee sale

Most mortgagee sales go to auction or tender, and often with no conditions. Risk usually passes at the hammer or when your tender is accepted. You buy the property as seen, and anyone living there may be able to stay until settlement.

That puts the work up front:

• Title search, LIM and a building report before you bid
• Insurance checked
• Your lawyer through the paperwork
• Finance arranged, unconditionally

A deposit of about 10% is usually due on auction day. On an illustrative $755,000 price, that’s $75,500 available straight away.

Getting finance ready for a mortgagee sale

If there’s no finance condition, you need the loan sorted before you raise your hand. Here’s what I do with clients:

1. Get a mortgage pre-approval so you know your ceiling.
2. Book a registered valuation on the property, so your lender is comfortable with the value before auction day.
3. Read how auction, tender and multi-offer finance works, so you know what unconditional means for you.
4. Keep a buffer. If the valuation comes in under your bid, you cover the gap.

Buying it as an investor? The lending rules are tighter, so start with property investment loans.

If you’re facing a mortgagee sale yourself

Ring your lender early. The sooner you do it, the more options you have, and they often include a hardship arrangement, restructuring the loan or selling the property yourself on your own terms. Our mortgage rescue page explains what’s possible, and my post on dealing with mortgage arrears covers the first steps.

Common questions

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This article is general information only and isn’t personalised financial advice. Figures are illustrative and based on the assumptions shown. Mortgage Sense is a trading name of Yatin Kainth, a Financial Adviser (FSP1007497) providing advice under the Mortgage Managers licence (North West Group Holdings Ltd, FSP682791). See the Disclosure Statement.