Can You Get a Mortgage with a Student Loan? 📚💰
If you've recently graduated and are still repaying your student loan, you might be wondering whether that debt stands in the way of buying a home. The good news is that having a student loan doesn’t stop you from getting a mortgage. In fact, it’s quite common for first-home buyers to have a student loan. Lenders understand this and factor it into their assessments, but it’s far from a dealbreaker.
How Lenders View Your Student Loan
When you apply for mortgage pre-approval, lenders take your income and expenses into account. Since student loan repayments kick in when you earn over around $21,000 annually, and are automatically deducted from your paycheck at a rate of 12%, lenders will reduce your usable income by that amount. This can lower how much you're able to borrow, but it doesn’t disqualify you from getting a loan. Importantly, lenders don’t care how much student debt you still owe—only the impact of the regular repayments on your income matters.
Should You Pay Off Your Student Loan First?
Whether or not to pay off your student loan before applying for a mortgage depends on your individual financial situation. If your deposit is strong but your income is slightly short of what’s needed to secure the loan, paying off the student loan may help increase your borrowing power. However, since student loans are interest-free in New Zealand, and repayments adjust with your income, they’re a lower priority than high-interest debt like credit cards or personal loans. If your income is already high enough, your best strategy may be to focus on building your deposit instead
The key takeaway is that a student loan may reduce how much you can borrow, but it doesn’t prevent you from buying a home. What’s most important is understanding how your loan affects your overall financial picture and planning accordingly. Every buyer’s situation is different, so personalised advice can make all the difference. Your trusted mortgage adviser is there to help people in all kinds of financial circumstances, including those with student loans, get into their first homes. If you’re not sure where to start or want help exploring your options, get in touch - we’re here to help you find the best way forward.