NZ Mortgage & Property Glossary

Plain-English definitions of 75+ common New Zealand mortgage and property terms. Understand every term before buying your home.

A

ANZ: Australia and New Zealand Banking Group. One of the four major banks in New Zealand, offering home loans, KiwiSaver, and other financial services.
ASB: ASB Bank, a subsidiary of Commonwealth Bank of Australia. One of New Zealand's four major banks, widely used for home lending.
Asking Price: The advertised price of a property in a private treaty sale. It represents the seller's expectations but is often a starting point for negotiation.

B

BNZ: Bank of New Zealand. One of the four major banks in New Zealand, offering residential mortgages, business lending, and KiwiSaver.
Body Corporate: The collective group of unit title property owners responsible for managing shared areas, enforcing building rules, and collecting levies for maintenance. Common in apartments and townhouse complexes.
Bridging Finance: A short-term loan that bridges the gap when you buy a new property before selling your current one. Typically costs 1-2% more than standard mortgage rates and requires servicing both properties simultaneously.
Bright-Line Test: A tax rule requiring you to pay income tax on profits from selling residential property within a specified period. Currently 2 years for most properties. The main family home is generally exempt.
Builder's Report: A professional inspection assessing a property's structural condition, weathertightness, and identifying defects. Banks may require one as a condition of lending.

C

Capital Gains: The increase in a property's value over time. While NZ does not have a formal capital gains tax, the bright-line test taxes profits on properties sold within the qualifying period.
Caveat: A legal notice registered on a property title that warns others of a claim or interest in the property. It can prevent the property from being sold or transferred until the claim is resolved.
Chattels: Moveable items included in a property sale, such as curtains, light fittings, dishwasher, and heat pumps. These are listed in the sale and purchase agreement.
Code of Compliance Certificate (CCC): A certificate issued by the local council confirming that building work has been completed in accordance with the approved building consent and meets the Building Code.
Conditional Offer: An offer to purchase a property that is subject to conditions being met, such as finance approval, builder's report, or LIM report. The buyer can withdraw if conditions are not satisfied.
Conveyancing: The legal process of transferring property ownership from seller to buyer. A conveyancer or property lawyer handles title searches, contract review, and settlement.
Covenant: A legal restriction attached to a property title that controls what can or cannot be done with the land. Common examples include building height limits, fencing requirements, or restrictions on business use.
Cross Lease: A form of property ownership where multiple owners share the land under lease agreements. Each owner leases their section from the others. Changes to the property may require consent from co-lessees.

D

Debt-to-Income Ratio (DTI): The ratio of your total mortgage debt to your gross annual income. RBNZ DTI limits are 6x income for owner-occupiers and 7x for investors. Used by banks to assess borrowing capacity.
Deposit: The upfront payment made when purchasing a property. Typically 10% of the purchase price is paid on signing the agreement, with the full deposit (usually 20%) required at settlement.
Deposit Hurdle: When a borrower's deposit is insufficient to meet standard LVR requirements. Options include low-deposit lending, KiwiSaver withdrawal, or family assistance.

E

Easement: A legal right allowing someone to use another person's land for a specific purpose, such as a shared driveway or access to utilities. Easements are registered on the property title.
Equity: The portion of your property you own outright — the difference between the property's market value and your outstanding mortgage. For example, a $600,000 home with a $400,000 mortgage has $200,000 equity.

F

First Home Grant: A government grant for eligible first home buyers who have been KiwiSaver members for at least three years. Provides up to $5,000 for existing homes or $10,000 for new builds per applicant.
First Home Loan: A government-backed scheme allowing eligible first home buyers to purchase with as little as 5% deposit, bypassing standard LVR restrictions. Administered through participating banks.
Fixed Interest Rate: An interest rate locked in for a set term (typically 6 months to 5 years). Provides repayment certainty but may incur break costs if you want to change before the term ends.
Floating Interest Rate: An interest rate that fluctuates with market conditions. Typically higher than fixed rates but allows unlimited extra repayments and no break costs.
Freehold: The most complete form of property ownership in New Zealand. The owner has full rights to the land and buildings with no time limit. Also known as fee simple.

G

Genuine Savings: Savings accumulated over time (typically 3+ months) from your own income, as opposed to gifts or windfalls. Banks use genuine savings history to assess your financial discipline.
Gifting Declaration: A legal document confirming that money contributed toward a property deposit is a gift, not a loan that must be repaid. Banks require this when family members help with deposits.
Guarantor: A person (usually a family member) who agrees to be responsible for a loan if the borrower defaults. Guarantor arrangements allow borrowers to access lending they might not qualify for alone.

H

Hardship: Financial difficulty that makes it hard to meet mortgage repayments. Banks have hardship teams that can offer options such as payment holidays, term extensions, or restructuring.
High LVR Lending: Mortgage lending where the loan-to-value ratio exceeds standard limits (above 80% for owner-occupiers or above 65% for investors). Banks have limited allowances for high LVR loans and may charge higher rates or fees.

I

Income Hurdle: When a borrower has sufficient deposit but their income is too low to service the required mortgage at the bank's test rate (typically around 8-9%).
Interest Deductibility: The ability to claim mortgage interest as a tax deduction against rental income on investment properties. Fully restored from April 2025 after temporary restrictions.
Interest-Only Mortgage: A mortgage where you pay only the interest each period without reducing the principal. Common for investors to maximise cashflow, but the loan balance does not decrease.

J

Joint Tenants: A form of property co-ownership where all owners have equal shares and rights of survivorship — if one owner dies, their share automatically passes to the surviving owner(s).

K

Kiwibank: A New Zealand-owned bank, part of Kiwi Group Holdings. Often competitive on mortgage rates and a popular choice for home lending alongside the four major Australian-owned banks.
KiwiSaver: New Zealand's voluntary workplace savings scheme for retirement. Members can withdraw most of their balance toward a first home purchase after 3+ years of membership.
KiwiSaver HomeStart Grant: Now called the First Home Grant. A government subsidy for KiwiSaver members of 3+ years to help with purchasing their first home, subject to income and property price caps.

L

Leasehold: Property ownership where you own the buildings but lease the land from a landowner. Ground rent is payable and lease terms vary. Banks may have restrictions on lending for leasehold properties.
LIM Report: Land Information Memorandum — a council report detailing property information including building permits, consents, drainage, zoning, hazards, and special features. Essential due diligence for buyers.
Loan-to-Value Ratio (LVR): The percentage of a property's value that is mortgaged. A 20% deposit gives an 80% LVR. RBNZ sets maximum LVR limits: 80% for owner-occupiers and 65% for investors (existing properties).

M

Master Build Guarantee: A 10-year guarantee provided by Registered Master Builders covering defects in new home construction. Covers structural defects, non-completion, and loss of deposit if the builder fails.
Member Tax Credit: A government contribution to your KiwiSaver account. Contribute at least $1,042.86 per year to receive the maximum credit of $521.43 annually.
Mortgage Broker: A licensed financial adviser who compares home loan options across multiple banks and lenders on your behalf. Their service is typically free to the borrower as they are paid by the lender.
Mortgage Holiday: A temporary pause on mortgage repayments agreed with your bank. Interest continues to accrue during the holiday, increasing your total loan balance. Usually available for up to 3-6 months.

N

Negative Equity: When your outstanding mortgage is greater than the current market value of your property. This can happen if property values decline after purchase.
New Build Waiver: An RBNZ exemption allowing banks to lend up to 80% LVR on new build properties for both owner-occupiers and investors, compared to stricter limits on existing properties.

O

Offset Account: A savings account linked to your mortgage where the balance offsets your loan, reducing the interest charged. For example, $50,000 in an offset account on a $500,000 mortgage means you only pay interest on $450,000.
OTP (Off the Plan): Purchasing a property before it is built, based on plans and specifications. Common for apartments and townhouse developments. Settlement occurs when the build is completed.

P

Personal Guarantee: A legally binding promise to repay a debt if the primary borrower cannot. Common in business lending and some property transactions involving trusts or companies.
Pre-Approval: A conditional commitment from a bank confirming how much they will lend you, subject to finding a suitable property and meeting remaining conditions. Typically valid for 3-6 months.
Principal: The original amount borrowed on a mortgage, excluding interest. Repaying principal reduces your loan balance and builds equity.
Property Manager: A professional who manages rental properties on behalf of the owner, handling tenant selection, rent collection, maintenance, inspections, and compliance with tenancy laws.

R

Rates (Council Rates): Annual charges levied by local councils on property owners to fund local services including water, roads, and waste collection. Rates vary by council and property value.
RBNZ: Reserve Bank of New Zealand — the central bank that sets the Official Cash Rate (OCR), regulates banks, and sets LVR and DTI restrictions for mortgage lending.
Refinancing: Moving your mortgage from one bank to another, usually to get a better interest rate, access additional features, or consolidate debt. May involve break costs if you are on a fixed rate.
Registered Valuation: A formal property valuation conducted by a registered valuer. Banks often require one when the purchase price is above a certain threshold or for high LVR lending.
Repayment Holiday: See Mortgage Holiday. A temporary break from mortgage repayments agreed with your bank, during which interest continues to accrue.
Reserve Price: The minimum price a seller will accept at auction. If bidding does not reach the reserve, the property is passed in and may be negotiated privately.
Revolving Credit: A mortgage facility that works like an overdraft. Your salary goes in, reducing the balance and interest charged, while you can draw funds up to your limit. Interest is calculated daily.
Ring-Fencing: Tax rules that limit the ability to offset rental property losses against other income. Ring-fencing means rental losses can only be carried forward against future rental income.
Rural Lending: Mortgage lending for lifestyle blocks, farms, and rural properties. Often involves specialist assessment as rural properties can be harder to value and may have different LVR requirements.

S

Sale and Purchase Agreement: The binding legal contract between buyer and seller that sets out the terms of a property transaction, including price, conditions, chattels, and settlement date.
Settlement Date: The agreed date when legal ownership of the property transfers from seller to buyer, the purchase price is paid, and the buyer receives the keys.
Split Banking: Holding mortgages with two or more banks on different properties. Can reduce risk and improve negotiating power, though it adds complexity to your banking arrangements.
Stratum in Freehold: A form of freehold ownership for multi-level developments where each unit has its own title and the owner has full ownership of their unit space within defined boundaries.

T

Tenants in Common: A form of property co-ownership where each owner holds a defined share (which can be unequal). Unlike joint tenants, shares do not automatically pass to the surviving owner on death.
Tender: A property sale method where buyers submit sealed written offers by a deadline. The vendor reviews all offers and selects the preferred one. Offers may be conditional or unconditional.
Test Rate: The interest rate banks use to assess whether you can afford mortgage repayments. Typically around 8-9%, higher than actual rates, to ensure you can handle rate increases.
Title: The legal document proving property ownership, listing the owners, any mortgages registered against the property, easements, covenants, and other restrictions.

U

Unconditional Offer: A property offer with no conditions attached — the buyer is committed to purchasing regardless. Auction purchases are always unconditional. Stronger than conditional offers but carries more risk.
Unit Title: A form of property ownership for apartments and multi-unit buildings where each unit has its own title. Owners share responsibility for common areas through a body corporate.

V

Vendor: The legal term for the property seller in a real estate transaction.
Vendor Finance: An arrangement where the property seller lends some of the purchase price to the buyer, reducing the bank mortgage required. Uncommon but sometimes used in commercial or rural transactions.

W

Westpac: Westpac New Zealand, a subsidiary of Westpac Banking Corporation (Australia). One of New Zealand's four major banks, offering home loans, KiwiSaver, and business banking.

Still have questions?

Our mortgage advisers can explain any term in plain English and help you understand exactly what it means for your situation.

Talk to an Adviser — Free