If you’re paying rent while saving for a deposit, you may have wondered how those regular payments compare with owning your own home. Could what you currently spend on rent, combined with what you’re saving each week, cover your mortgage repayments?
Your rent and savings can be a useful starting point. But working out whether you’re ready to buy also means understanding your deposit, what a lender might approve and the extra costs of homeownership.
Here are six common questions to help you put the picture together.
It could cover a meaningful portion, depending on how much you borrow, your interest rate, and your loan term.
If you’re paying $750 a week in rent, that’s $39,000 a year. For comparison, a $500,000 mortgage over 30 years at an illustrative interest rate of 5.5% would cost approximately $655 a week in principal and interest repayments.
That makes the comparison worth exploring. However, the 5.5% rate is an example, not a current offer or a rate you would necessarily qualify for. Actual repayments depend on your loan arrangements, and owning a home brings costs beyond the mortgage such as council rates, house insurance and maintenance, so it’s important to compare your rent with the overall cost of owning a home.
Yes. Your regular savings help show what you’re already managing within your budget.
If you pay $750 in rent and save another $300 each week, that’s $1,050 you’re currently allocating towards housing and your future home. Using the same illustrative 5.5% rate and 30-year term, a $700,000 mortgage would cost approximately $917 a week.
But that would leave only around $133 from your existing budget for additional ownership costs and ongoing savings. The key question is how much you can comfortably commit while leaving room for everyday life and unexpected bills.
A repayment calculation is a starting point, not a lending approval. Banks also assess your income, living expenses, existing debts, credit limits, deposit, and the property you want to buy.
They generally test whether you could manage repayments at a higher interest rate than the one offered. This means being comfortable paying rent at a certain level doesn’t automatically qualify you for an equivalent mortgage repayment.
Different lenders can assess the same situation differently. This is where a Mortgage Adviser can help you understand your borrowing options and identify anything worth improving before you apply.
A 20% deposit can give you more options, but some buyers can purchase with less. Eligible buyers may be able to access a First Home Loan with a 5% deposit, subject to eligibility and lender approval.
Your deposit could include savings, eligible family gifts and a KiwiSaver first-home withdrawal.
Your approved borrowing plus your usable deposit helps establish your purchase budget. It's also best to set aside money for legal work, property checks, and moving costs.
Alongside your mortgage, allow for council rates, house insurance, maintenance, and any applicable water or body corporate charges. These can vary considerably between properties, so check the likely costs of the home you’re considering.
It’s also sensible to keep an emergency buffer and continue saving after you buy. Homeownership can help you build equity as you repay your loan, but property values can fall as well as rise. Your budget needs to cover the ongoing costs of owning your home, regardless of what happens to its value.
Buying with a partner, friend, or family member may be an option. Combining resources can help with the deposit and repayments, but everyone needs to understand their responsibilities.
Before committing, get independent legal advice and agree on how ownership, expenses, and a future sale would work. Depending on the loan agreement, you could be responsible for more than your agreed share if someone else cannot pay.
Your first step doesn’t have to be an application or an open home. If you’d like to understand how your rent, savings, and deposit could translate into a first-home budget, the team at Kris Pedersen Mortgages is happy to help you work through the numbers and see what's possible. Please get in touch with them at info@krispedersen.co.nz or call the office at (09) 486 4719 for a no-obligation chat.
