Can you get a mortgage if you have a student loan over $100,000?

Simran Kaur is co-founder of Girls that Invest, which offers commentary on personal investment aimed at young people.

Question: If you have a student loan over $100,000 are you now definitely not eligible for a mortgage from the bank? I saw info lurking around on social media platforms, haven’t done my own research on it, but am a bit stressed as I would love to buy my own home with my partner.

I have a student loan that’s over $100,000 and I am paying it off bit by bit on top of the percentage that goes towards my debt from my pay cheque, but feel like it won’t be enough for when I’m ready to purchase a home. Please help!

Answer: Hello! This is such a great question, and one we get asked a lot about!

Simran Kaur, founder of Girls That Invest, answers your questions.


Simran Kaur, founder of Girls That Invest, answers your questions.

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* Should NZ follow the US example of forgiving student loan debt?
* Five things you can do to make your mortgage application successful under the new rules
* What sort of mortgage should first home buyers be looking for?

Does having a student loan hinder those who want a mortgage and should students take this into account, when they’re studying, for future use?

Let’s start by breaking down what banks look at when you’re applying for a pre-approval. A pre-approval can be thought of as a stamp on your name to say the bank has agreed to lend you up to $X amount of dollars to go buy your home, sometimes with a few conditions attached.

New Zealand follows different laws and regulations about student loans from some other countries. For one, our student loans are interest-free, as long as you’re living and working in New Zealand. This means our banks don’t look at $100,000 worth of student loan debt in the same way they would look at $100,000 worth of credit card debit with a 20% interest rate.

Student loans are usually considered “good debt”. “Bad debt” would be anything that has high interest rates. I’m talking car loans, credit card debt, even buy now pay later schemes are considered bad forms of debt. This is why student loans do not affect your credit score or credit history.

To get the bank to say yes to giving you a mortgage, you need two things, a deposit and an income.

Where student loans can become a problem is that they can reduce your income.

Why? Because the government takes 12% of your salary once you earn more than $21,268 a year, which reduces the amount of debt you can service.

But all your mortgage broker or bank has to do is take this percentage off your weekly salary to see what your income is, and then consider whether this can support a mortgage.

How much you make is far more important than how much student loan debt you have.

Let me show you an example: Someone earning $60,000 a year with a $100,000 student loan has about $89 taken off their weekly income.

What if they earned the same but only had a $10,000 student loan?

They would still be paying $89 a week towards their student loan – although probably not for as long.

There’s no need to feel embarrassed about high student loan debt. Remember, it’s your income that is going to be more important when it comes to buying a home, not your student loan.

You can rest assured that focusing on paying off high-interest debt and finding ways to upskill in your career are going to help you much more in your journey to buying your first home.

CORRECTION: An earlier version of this story said the student loan repayment threshold was $19,084. Corrected September 23, 9.19am.

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