One home loan application gives four different responses from banks
If you want to borrow more money on a home loan than your bank is willing to offer, the answer may be as simple as applying somewhere else.
Each bank has its own way of determining how much it is willing to lend a borrower, and the answers can vary widely.
Using a broker's servicing calculator, we ran the numbers for a couple with a $50,000 deposit wanting to buy a standard residential property. Using the same information about their living expenses, other debts and assets, we checked what each bank would lend them.
ASB would go to $325,000, ANZ $350,000, Westpac $335,000 and BNZ only $275,000.
Claire Matthews, a banking expert at Massey University, said the difference was not surprising.
"There is a lot of anecdotal information about borrowers who can't get a loan from one bank but can from another, and often that relates to the amount they can borrow because the amount the bank is willing to lend is not sufficient," she said.
"The amount a bank is willing to lend reflects their assessment of the borrower's situation, and different banks will assess a borrower in different ways.
"Each bank is willing to accept more or less risk. In addition, they will have different expectations about the surplus income required by the borrower to meet general expenses.
"It may also reflect slight differences in the interest rates being charged, because a higher interest rate will mean higher repayments, so that the same borrower will be able to borrow less in order to stay within debt to income guidelines."
A BNZ spokeswoman said it would look at the value of the property being bought and what the customer was paying to determine whether it was reasonable. It would also look at the type of lending, how much deposit they had, whether it would be a rental and how well they could manage to meet the mortgage payments if interest rates went up.
"It's about ensuring the customer can reasonably pay back their loan over the long term. This involves looking at people's household living expenses and household income," she said.
A Kiwibank spokesman said it wanted to see the borrower's general living expenses and discretionary spending relative to their income and the number of dependents they had.
"We also look for the level of certainty on income [and] see if there indications of spending to the limit of their income with no regular savings each pay period. We look for indications of gambling. We also consider whether there are indications of frequently leaving jobs and addresses."
Broker Glen McLeod said the banks would also consider applicants' credit card limits, KiwiSaver contributions, the level of rates they would have to pay and insurance costs.
He said banks would adjust their requirements depending on their appetite for loans. "They can tighten these nuts and bolts to pick the cream or if they need more loans in the door they can lower the requirements and let the floodgates open a bit more."
Over his career, he said Westpac had had one of the "friendliest" mortgage servicing calculators. "But at the moment it's not so friendly. ANZ is pretty friendly at the moment – ASB not so."
In the past the difference between what banks were willing to lend could run to hundreds of thousands of dollars. "I once had a client get a no from ANZ and a yes from National Bank and at that point they were the same bank. It's because they had two different calculators."
He said how the loan was structured could also make a difference. Sometimes banks were happier to accept an application from someone who was going to roll short-term debt into their mortgage rather than continuing to service other loans.
People looking for a loan should shop around, he said. Brokers could help them target banks that would be more likely to accept their application.