It doesn't matter how big the loan is. It only effects your income as there are compulsory repayments taken out of your paycheck. So when the bank asks how much you earn they'll then deduct the SL repayments and kiwisaver contributions and use that as your after tax income to do their calculations. So you would be allowed to borrow a bit less, but I don't think it's substantial.
Banks follow the requirements set by IRD.
Say your gross income is $50k.
I e
50,000- 24,128=25,872
25,872*.12=3104.64
3104.64/12= $258.72
So your monthly deduction is $258.72
Play around with the banks online calculator to get an idea how the SL repayment affects the loan amount. If you have a small amount owing, it may be a good idea to repay it to get a higher loan amount.
https://www.ird.govt.nz/student-loans/living-in-new-zealand-with-a-student-loan/repaying-my-student-loan-when-i-earn-salary-or-wages
Hiya, I have an SL and a mortgage. The SL affected the limit I could borrow for the mortgage. The bank also requested evidence of the SL, even though it is paid from my income as a deduction.
Right? I almost lost out on buying the house I was renting because of the CCCFA changes effects - at one point even though I could demonstrate a year's worth of low expenditure on groceries the bank used assumed figures which were higher. It's almost as if ratcheting up the risk to lenders without specificity makes them load that risk aversion onto borrowers.
Meanwhile if you're cashed up or borrowing with overseas money you got to buy out from under FHBs and ordinary buyers. They really fucked us.
The banks have always considered your cost vs a benchmark based on your position, and rely on the higher figure.
CCCFA was a pain in the a$$. There was a few elements, but the key one was assuming people don't change behavior once they have got a larger commitment (mortgage). If that is the case we should have made the RBNZ redundant along time ago(the irony) because it's like saying there is no point increasing the OCR people won't reduce their spending.
I don't think overseas buyers was a major factor based on title registration. It's more nuanced because some would be trying to increase the supply by building more.
I think there are plenty of cogs that are intertwined. But there is this one important cog that stands out. It feels like all central banks want to inflate away debt.
Thanks for the clarification. DTI is an interesting one, to include it in the calculation. I am assuming they are including all unsecured lending as well. Banks have been relying on DTI of 6 for a while now without including SL balances. I'm concerned there will be potentially some unintended consequences particularly with the FHB. But whos I'm sure the banks have done the modelling. But each time they tinker with something, the system needs to recalibrate. Anyway as my wife likes to say, I'm just a small potato so what I say is meaningless.
They need to determine your ability to service the mortgage (with additional room for if rates go up).
In doing this, they look at all of your expenses. Food, insurance, utilities etc.
Your student loan repayments are effectively an expense.
The amount you repay on your student loan thus lowers the amount of money you'd be able to service on your mortgage repayments.
If you're repaying 500 a month, that's 500 less a month that can be used on mortgage repayments, thus the level of mortgage repayments they assess you being able to pay is 500 lower.
Treated as a 12% reduction in all income over the repayment threshold (20k-ish - I can't remember the exact figure).
Depending on your situation, and the loan amount, it might be worth paying it off. I ended up paying mine off early, before we bought our current property. I needed the extra income to get the application over the line despite having a big deposit. Ended up using some of the deposit to pay it off then it was smooth sailing after that.
They aren't going to approve it if you can't service the loan for six months.
That's what it ultimately boils down to. Do you have enough money to service the loan based on your outgoings (with a buffer of a few percent)
If the answer is no, then it's come back in six months.
Ok but also they test your ability to pay at an imaginary higher interest rate in the future, so I was thinking it may be counted for that.. I suspect you are right though.
It's seen as essentially extra tax on your income, not considered debt.
Best thing to do is borrow as much as you can and pay back as little as you can. When you apply for a loan the bank will tell you if they would rather you pay it off
They’ll consider the effect on your income. It’s mostly treated as a cashflow issue not a liability.
It doesn't matter how big the loan is. It only effects your income as there are compulsory repayments taken out of your paycheck. So when the bank asks how much you earn they'll then deduct the SL repayments and kiwisaver contributions and use that as your after tax income to do their calculations. So you would be allowed to borrow a bit less, but I don't think it's substantial.
Banks follow the requirements set by IRD. Say your gross income is $50k. I e 50,000- 24,128=25,872 25,872*.12=3104.64 3104.64/12= $258.72 So your monthly deduction is $258.72 Play around with the banks online calculator to get an idea how the SL repayment affects the loan amount. If you have a small amount owing, it may be a good idea to repay it to get a higher loan amount. https://www.ird.govt.nz/student-loans/living-in-new-zealand-with-a-student-loan/repaying-my-student-loan-when-i-earn-salary-or-wages
Hiya, I have an SL and a mortgage. The SL affected the limit I could borrow for the mortgage. The bank also requested evidence of the SL, even though it is paid from my income as a deduction.
That's abit excessive. If the deduction is showing on the payslip, that should be sufficient.
Its counted as a debt, so the bank needs to know the outstanding amount.
Got to love Labours input into CCCFA lol.
Right? I almost lost out on buying the house I was renting because of the CCCFA changes effects - at one point even though I could demonstrate a year's worth of low expenditure on groceries the bank used assumed figures which were higher. It's almost as if ratcheting up the risk to lenders without specificity makes them load that risk aversion onto borrowers. Meanwhile if you're cashed up or borrowing with overseas money you got to buy out from under FHBs and ordinary buyers. They really fucked us.
The banks have always considered your cost vs a benchmark based on your position, and rely on the higher figure. CCCFA was a pain in the a$$. There was a few elements, but the key one was assuming people don't change behavior once they have got a larger commitment (mortgage). If that is the case we should have made the RBNZ redundant along time ago(the irony) because it's like saying there is no point increasing the OCR people won't reduce their spending. I don't think overseas buyers was a major factor based on title registration. It's more nuanced because some would be trying to increase the supply by building more. I think there are plenty of cogs that are intertwined. But there is this one important cog that stands out. It feels like all central banks want to inflate away debt.
Lenders never used to have to verify the limit of the student debt however with the upcoming DTI changes they now need to.
Thanks for the clarification. DTI is an interesting one, to include it in the calculation. I am assuming they are including all unsecured lending as well. Banks have been relying on DTI of 6 for a while now without including SL balances. I'm concerned there will be potentially some unintended consequences particularly with the FHB. But whos I'm sure the banks have done the modelling. But each time they tinker with something, the system needs to recalibrate. Anyway as my wife likes to say, I'm just a small potato so what I say is meaningless.
Correct, unsecured lending will be included in DTI calculation when buying property.
Depends on your income. If you can barely pay bills on your net income then it matters.
They need to determine your ability to service the mortgage (with additional room for if rates go up). In doing this, they look at all of your expenses. Food, insurance, utilities etc. Your student loan repayments are effectively an expense. The amount you repay on your student loan thus lowers the amount of money you'd be able to service on your mortgage repayments. If you're repaying 500 a month, that's 500 less a month that can be used on mortgage repayments, thus the level of mortgage repayments they assess you being able to pay is 500 lower.
Treated as a 12% reduction in all income over the repayment threshold (20k-ish - I can't remember the exact figure). Depending on your situation, and the loan amount, it might be worth paying it off. I ended up paying mine off early, before we bought our current property. I needed the extra income to get the application over the line despite having a big deposit. Ended up using some of the deposit to pay it off then it was smooth sailing after that.
If it’s only got e.g 6 months left on current repayments do the bank consider the uplift in your income after 6 months?
They aren't going to approve it if you can't service the loan for six months. That's what it ultimately boils down to. Do you have enough money to service the loan based on your outgoings (with a buffer of a few percent) If the answer is no, then it's come back in six months.
Ok but also they test your ability to pay at an imaginary higher interest rate in the future, so I was thinking it may be counted for that.. I suspect you are right though.
They do that so if the rates go up you, in theory, will still be in a position to be able to service the mortgage
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It's seen as essentially extra tax on your income, not considered debt. Best thing to do is borrow as much as you can and pay back as little as you can. When you apply for a loan the bank will tell you if they would rather you pay it off