# HL-Q182: Choosing a loan refinance mortgage after income drop which bank Borrower: Household facing an income drop [Study](https://nzbrands.ai/research/banking/home-lending/) · Collected 11 October 2026 ## chatgpt Answer ID: f772f28e-bf2f-4d02-8ce7-9c23e3c93b9a If your income has dropped and you want to refinance your mortgage in New Zealand, the best bank to approach is usually your current lender first, followed by other banks or a mortgage adviser who can compare lenders willing to consider your new income. The key issue is that refinancing to another bank can be harder after an income drop, even if you have a good payment history. A new lender will generally reassess your income, living expenses, existing debts and ability to afford the repayments. ## Which bank should you approach? | Bank | Why consider it | | --- | --- | | ANZ New Zealand | Explicitly considers reduced income for hardship support and may restructure your home loan. [Financial hardship](https://www.anz.co.nz/banking-with-anz/financial-hardship/)[Help with financial difficulty](https://www.anz.co.nz/banking-with-anz/financial-hardship/how-we-can-help/) | | Kiwibank | Offers options including interest-only repayments, extending the loan term and restructuring. [Financial hardship & assistance | Accounts](https://www.kiwibank.co.nz/help/accounts/financial-support/financial-hardship-assistance/) | | BNZ | Considers hardship applications and accepts applications to refinance from other lenders, subject to approval. [Financial hardship application](https://www.bnz.co.nz/support/everyday-accounts/managing-accounts/experiencing-financial-difficulty)[Refinancing your home loan](https://verify.bnz.co.nz/support/home-loans/managing-your-loan/refinancing) | | Westpac New Zealand | May offer temporary repayment reductions, term extensions or other financial hardship support. [Financial hardship support](https://www.westpac.co.nz/personal/life-money/navigating-trying-times/financial-hardship/)[How can I reduce my loan repayments? - Help](https://www.westpac.co.nz/help/financial-hardship-faqs/how-can-i-reduce-my-loan-repayments/) | These are options to approach, not a ranking of approval likelihood. No bank can be identified as the most likely to approve you without knowing your financial position. ## What I'd do in your situation 1. Ask your current bank about a lower repayment, a temporary interest-only period, or extending your loan term. 2. If you want to switch banks, speak to a mortgage adviser who works with multiple lenders and can assess your application before submitting it. 3. If the income drop was unexpected and you are struggling with payments, ask about a formal hardship variation. New Zealand's Financial Markets Authority explains the available options and eligibility rules. [Hardship applications](https://www.fma.govt.nz/business/services/consumer-credit/hardship-applications/)[Hardship and financial difficulty](https://www.bankomb.org.nz/guides-and-cases/quick-guides/lending/hardship-and-financial-difficulty) ## Let me narrow it down for you I can give you a more useful recommendation if you tell me these four things. With those answers, I can help you work out whether switching banks is realistic or whether renegotiating with your existing bank is the better route. --- ## gemini Answer ID: c342103f-6589-429b-890e-2f71c73915a9 Refinancing a mortgage in New Zealand after experiencing an income drop is uniquely challenging because all retail banks (including the major lenders like ANZ, ASB, BNZ, Kiwibank, and Westpac) must strictly adhere to the Credit Contracts and Consumer Finance Act (CCCFA) and Reserve Bank guidelines. When you apply to refinance, banks treat it as a **brand-new lending application**. They will completely reassess your servicing capacity (income versus expenses) rather than automatically granting a switch just because you want a lower interest rate. --- ### How New Zealand Banks View an Income Drop 1. **Serviceability Testing:** Banks do not test your loan at the current interest rate; they use a "test rate" (often significantly higher, around 7% to 8% or more) to ensure you can handle future rate hikes. An income drop drastically cuts your maximum borrowing power under this stress test. 2. **The "Same-Balance" Exemption:** If you are refinancing the **exact same loan amount** (or less) to shift to a different lender for a better rate or cashback, Reserve Bank rules mean you may be exempt from strict Loan-to-Value Ratio (LVR) caps (e.g., if you have less than 20% equity). However, **serviceability (income) rules still apply.** Even if your equity is safe, the bank must still prove you can afford the repayments on your lower income. 3. **No Single "Best" Bank for Lower Incomes:** No major New Zealand bank has a policy saying "we accept lower incomes." Every mainstream bank uses similar responsible lending codes. If your income has dropped to a point where you fail serviceability with the major banks, moving to another mainstream bank via a standard refinance will likely result in a decline. --- ### Actionable Steps and Strategies If you need relief due to an income drop, refinancing to a new bank may not be your best first option. Consider this structured action plan: * **1. Approach Your Current Bank First (Hardship or Retention):** * Before paying legal fees or applying elsewhere, talk to your current lender. * If you are facing genuine financial distress due to job loss, reduced hours, or illness, New Zealand banks have **Financial Hardship teams**. They can legally temporarily suspend principal payments, switch you to interest-only, or extend your loan term to lower immediate repayments. This avoids a formal "decline" on your credit record. * If your income has dropped but you can still comfortably service the debt at a lower rate, ask your current bank for their best competitive retention rate or to refix a maturing portion. * **2. Calculate Fixed-Rate Break Costs:** * If you are locked into a fixed-term mortgage and want to break it to chase a lower market rate, ask your bank for a **break fee calculation** first. If interest rates have dropped since you fixed, break fees can wipe out any short-term savings. * **3. Utilize Mortgage Brokers (Advisers):** * Instead of cold-calling different banks, engage a free, independent New Zealand mortgage broker. * Brokers have visibility across the entire lending market—including second-tier or specialist lenders (such as Resimac or Bluestone) if mainstream banks decline you. Specialist lenders have more flexible income-verification criteria (useful if you are self-employed or have variable income), though they usually carry higher interest rates. * **4. Weigh Up Refinancing Packages vs. Costs:** * If you do qualify elsewhere, look at banks offering explicit **Refinancing Packages** (such as Kiwibank's package, which can cover legal transfer fees and structural costs up to specific limits). Factor in legal fees, discharge fees from your old bank, and cashback clawback periods before making the jump. --- *Are you looking to lower your monthly repayments because of a temporary income shift, or are you exploring options because you've been declined by your current lender?* --- ## ai-mode Answer ID: 5b7f8f61-0690-4542-a8b0-ae294f0b3d58 Refinancing a mortgage to a different bank in _New Zealand_ after experiencing an income drop can be quite challenging, but it is not entirely impossible. When you apply to refinance, New Zealand registered banks are strictly bound by the Credit Contracts and Consumer Finance Act (CCCFA) and Reserve Bank of New Zealand (RBNZ) debt-to-income (DTI) and serviceability restrictions to ensure you can afford the loan. An income drop affects your borrowing capacity (servicing test), meaning switching to a new main bank may result in a decline if your reduced income no longer meets their specific test rates (which include a buffer above actual market interest rates). Why Switching Banks is Difficult with Lower Income * * **Serviceability Testing:** A new bank will recalculate your expenses and income from scratch, applying a stress-test interest rate. If your income has dropped significantly, your maximum allowable loan amount under their formulas drops too. * **The "Existing Bank" Advantage:** Your current lender already knows your repayment history. If you have a clean track record of paying on time, staying with your current bank and requesting a **restructure, term extension, or temporary hardship/interest-only variation** is usually much easier than trying to pass a new bank's lending criteria. * Which Bank or Lenders to Consider? No single mainstream New Zealand bank (like ANZ, ASB, BNZ, Kiwibank, or Westpac) publicly advertises "income drop friendly" refinancing, as they all share similar regulatory compliance obligations regarding affordability. However, options depend on your specific situation: 1. **Your Current Bank First:** * Before looking elsewhere, talk to your current lender. They can often re-structure your existing loan (e.g., extending your term back out to 30 years if it was shorter, or moving portions to interest-only temporarily) without a full re-qualification process that a brand-new application demands. 2. **Use a Mortgage Broker:** * Policies, discretionary allowances, and serviceability calculation models vary significantly between mainstream banks. A registered financial adviser/mortgage broker can look at your reduced income and shop your scenario anonymously across multiple banks to see which institution's credit policy is most flexible for your specific profile. 3. **Non-Bank Lenders:** * If mainstream retail banks decline your refinance application due to the income drop, **non-bank lenders** (such as Resimac, Asteron, or specialized second-tier lenders) focus more heavily on your equity (how much of the house you own) and your proven payment history rather than rigid income formulas. Keep in mind that non-bank interest rates and setup fees are typically higher, so this is usually used as a 1-to-2-year stepping stone until financial stability or income recovers. [www.luminate.co.nz] If you'd like to narrow down your options, tell me: * Roughly **how large your remaining mortgage is** compared to your property's estimated value (equity) * Whether your income drop is **temporary or permanent** * If you are currently **behind on payments** or still up-to-date I can give you a better idea of whether restructuring or a broker is your best next step. --- ## ai-overviews Answer ID: 44a64d78-8ab7-4415-b6c8-5cc56c600cda Refinancing a mortgage after a drop in income can be difficult in New Zealand because **all major banks (ANZ, ASB, BNZ, Westpac, and Kiwibank) must run rigorous serviceability tests** using artificial "test rates" well above the market rate. If your new income does not meet their strict uncommitted monthly income and debt-to-income (DTI) metrics, a traditional bank will likely decline the refinance application. Instead of searching for a specific retail bank, your most effective strategy is to assess alternative lenders and structural options. * * * 1\. Your Existing Bank (Restructuring vs. Refinancing) Before trying to switch to a new bank, you should try to **restructure** your loan with your current lender. Existing banks usually do not re-test your income if you are just changing the terms of your current debt without borrowing more. * **Extend the Loan Term:** If you have been paying your mortgage for years, ask to extend the term back out to 30 years to lower your minimum required cash repayments. * **Interest-Only Period:** Request a temporary switch to interest-only payments (typically granted for 6 to 12 months) to give your budget breathing room while your income recovers. * * * 2\. Non-Bank Lenders If you must switch or consolidate high-interest debts to lower your monthly exposure, **non-bank lenders** are far more flexible with income drops, self-employment gaps, or unconventional income files than traditional banks. * **Primary Options:** Lenders such as **Avanti Finance, Pepper Money, Resimac, or Basecorp Finance**. * **The Trade-off:** They often accept "low-doc" or alternative proof of income, but they may charge slightly higher interest rates or setup fees than mainstream banks. * * * 3\. Key Constraints to Consider Constraint| Impact on Your Application ---|--- **DTI Caps**| The Reserve Bank caps owner-occupier Debt-to-Income ratios at **6x gross income** for mainstream banks, making reduced incomes a hard barrier. **Test Rates**| Banks will test your ability to pay at an artificial rate (often **8% to 9%**), even if actual fixed rates are much lower. **Break Fees**| If you leave your current bank before your fixed term expires, you could face heavy early repayment break fees. * * * Strategic Recommendation Do not apply blindly to multiple banks, as multiple credit checks will lower your credit score and make approval harder. **Engage an independent New Zealand mortgage broker.** A broker can run your new income through the serviceability calculators of multiple banks and non-bank lenders simultaneously to find the single lender most likely to approve your specific financial situation without damaging your credit profile. To help narrow down the best path forward, could you share: * Approximately **how much your gross household income dropped** (e.g., halved, down 20%)? * Your current **estimated home value** vs. your **remaining loan balance** (to see your equity level)? * Whether your income drop is **temporary** (e.g., parental leave, changing jobs) or **permanent**?