For New Zealanders living overseas, the dream of returning home often includes buying a property, whether it’s a family home or an investment. However, navigating the mortgage process as an expat can be challenging, especially when it comes to understanding the specific lending requirements for buying property in New Zealand. Read on to get an overview of what expat Kiwis need to know, from income verification and deposit requirements to currency risks and eligibility criteria.
Income verification and currency considerations
Lenders will require proof of your overseas income, including employment contracts, pay slips, tax returns and bank statements. This income is typically converted into New Zealand dollars for assessment and any currency fluctuations may impact your borrowing capacity.
Deposit requirements
To offset the risks associated with currency fluctuations and the complexities of verifying overseas income, expats are often required to provide a larger deposit than local borrowers. Typically, you’ll need a deposit of 20% or more of the property’s value.
Credit history
During your mortgage application, lenders will review your credit history both in your home country and, if applicable, in New Zealand. A strong credit history in both regions will improve your mortgage application.
Residency and visa status
New Zealand citizens and permanent residents of New Zealand who are considered to be ‘ordinarily resident’ can buy property without restrictions, but other overseas people usually cannot buy a house or land in New Zealand.
If you have a residence class visa but you are not yet ‘ordinarily resident’, you can buy or build one home to live in as long as you get consent from the Overseas Investment Office before you buy. You can apply for pre-approval that lasts up to a year for property defined as ‘Residential Land’.
Employment stability
Employment stability is an essential factor for lenders when assessing mortgage applications from expats. Lenders prefer borrowers with a consistent and reliable income, as it indicates the ability to meet mortgage repayments over the long term. If your income is derived from contract work or irregular sources, you could face stricter lending criteria.
Debt-to-Income ratio (DTI)
DTI is another metric lenders use to assess a borrower’s financial health and ability to manage mortgage repayments. This ratio compares your total monthly debt payments – such as existing loans, credit card payments and any other regular debt - against your gross monthly income.
A low DTI ratio indicates that you have a manageable level of debt relative to income, while a high DTI ratio could signal to lenders that you are overextended financially, which could limit your borrowing capacity or result in higher interest rates.
Legal and tax considerations
Different tax rules may apply to non-residents, such as withholding tax on rental income or capital gains tax under the Bright-Line Test when selling the property. Specific regulations apply depending on residency status, such as obtaining approval from the Overseas Investment Office before buying certain types of land. Lenders will want to know that you’re compliant with these obligations.
Mortgage options for expats
If you’re considering returning to New Zealand to buy property, work with a mortgage adviser, such as those at Mortgage Express, who specialises in expat lending advice. Get help understanding the complexities and find out what mortgage options are available to you as an expat to set yourself up for success when you return to New Zealand.
