Your rights as a borrower with a mortgage, and different types of mortgages that are available.

Check before you take out a mortgage

A mortgage is security for a loan, so if you have a mortgage and you can no longer meet your repayment obligations, your bank or lender can sell your property to get their money back.

You can get a mortgage at a fixed interest rate, a floating interest rate, a combination of fixed and floating rates, or you can have a revolving credit facility. Discuss these options with your bank or mortgage broker. A mortgage broker offers free advice about mortgages to buy a home or other real estate. The broker is normally paid a commission by the lender.

Read the Code of Responsible Borrowing(external link) by the New Zealand Federation of Family Budgeting Services before taking out a loan or entering into a credit contract.

Some terms commonly used with mortgages are:

Break fees

If you are breaking your fixed-home loans early, look at the level of the break fee based on the bank's calculated loss for the early repayment. This level can drop quite significantly in a short time. It will apply if you refinance, when mortgage rates are falling.


If you are falling behind in your mortgage payments for any reason, contact your lender early to discuss your options. If you don’t contact them and you miss payments, you will be charged penalty interest and default fees.

Home buy-back schemes

With home buy-back schemes, you sell your family home to someone else (the transferee). The transferee pays your debts or gives you money, and you have the right to occupy the home in return for rent. You have the right to buy back your home at a later date.

Unsolicited loan offers

Be wary of loan offers sent to you, or online loan offers. Usually there is no lending assessment done to see if you can actually afford repayments. This is a breach of the Lender Responsibility Principles and the Responsible Lending Code.

See also:

Know your rights

Most mortgages are consumer credit contracts, so you have extra protection under the Credit Contracts and Consumer Finance Act (CCCFA). This protection includes rules about what fees your lender can charge when you refinance early or repay your loan early.

Lenders must make reasonable enquiries to ensure that a mortgage will meet your requirements.

Lenders must also provide credit with reasonable care and skill under the Consumer Guarantees Act and comply with the Lender Responsibility Principles and the Responsible Lending Code.

Lenders must be satisfied that you can afford to borrow the mortgage amount and make repayments without suffering substantial hardship. They are there to help you make an informed decision about whether or not to take out a mortgage. If you do go ahead, they can help you choose the best type of mortgage and give you advice to help you manage it well.

Lenders must make information about their standard contracts, fees, and interest rates publicly available (online) so you can compare mortgage rates more easily.

However, lenders do not have to agree to lend to you. They will take into account your income, job security, other debts and your credit history.

See also:

Credit related insurance

Some banks or lenders require you to have life insurance to cover your mortgage if you die or mortgage protection insurance.

Read Credit related insurance and warranties to find out whether you need it.

Mortgage brokers

Mortgage brokers have to be registered financial advisers and comply with the Consumer Guarantees Act for their services. Check the Financial Service Providers Register(external link) to confirm registration and which services are authorised. Find out:

  • what, if any, fees they will charge you
  • which mortgage providers they deal with
  • what commission they receive from the different lenders.

Read Getting financial advice to find out more.

Difficulties with repayments and hardship application

If you’re not already way behind in your loan repayments, ask your bank or lender for a change to the terms of your contract to help you meet your obligations. It’s too late to ask for a change if you’ve been in default for at least two months, or missed four consecutive payments, or received a mortgagee notice of default.

Changing the terms of your contract might include getting a mortgage holiday for a certain time, reducing your repayment amounts, or both. Be aware that these options increase the length of your loan and how much interest you pay overall.

You may make a hardship application in writing under the Credit Contracts and Consumer Finance Act (CCFA). In the application, you need to explain the particular cause for your payment difficulties, eg because of illness, injury, loss of employment, or the end of a relationship. You only get one chance to make a hardship application every four months, unless there are new and greatly different reasons for a new application within that time. The bank does not have to agree to assist you, but often they will if you approach them early.

See also:

Mortgagee sales and debt recovery

If you are not able to negotiate an arrangement with your bank or the lender, they may begin the debt recovery process and the mortgagee sale. To find out more about this process, see the Banking Ombudsman’s quick guide to Mortgagee sales.

Letter of demand

The first step of the debt recovery process is a letter of demand. If you don’t meet your repayment obligations, you are in default and a letter of demand is sent to you. It tells you how much you owe and demands payment by a certain date.

When you receive this letter, contact your lender and ask if it is possible to agree on a repayment programme, which makes it easier for you to repay your debt. If not, get some legal advice and consider either selling your house or refinancing with another lender.

Property Law Act notice (PLA)

If you haven't paid back the full amount specified in the letter of demand, you’ll get a PLA notice stating that you are in default. The notice will also tell you to pay a certain amount by a set date at least 20 working days after the notice is issued

If you haven't already done so, contact the lender about a repayment programme and/or get legal advice.

Mortgagee sale

If you don’t pay the amount specified in the PLA notice by the due date, the bank or the lender has the right to sell your property to recover the loan amount, interest and other costs, such as an early repayment charge on any fixed rate loans. They must take reasonable care to get the best price for the house. This care includes getting an independent valuation and appointing a real estate agent to market the property. The lender may pass on these costs to you.

After the mortgagee sale

You will be liable for the shortfall, if your house sells for less than the amount you owe. The lender may agree to enter into a repayment programme for the balance of your debt, or they could choose to take recovery action.

See Mortgagee sales(external link) on the Banking Ombudsman’s website to find out more.

You have different options if:

  • you are struggling with your loan repayments
  • a term of the loan contract is too harsh, or the lender acted unfairly
  • you were given incomplete or inaccurate information before or during the contract.

Contact the bank or lender first

If you have concerns about your bank’s lending decisions or are in financial difficulty, you should contact your bank first. If your concern or difficulty is not resolved to your satisfaction within 2 months, you can then contact the Financial Dispute Resolution Scheme that your lender belongs to.

Read Resolve a problem to find out more.

Next steps

If you are unable to resolve your issue directly with the bank, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Banking, finance and insurance

Need more help?

Contact us for more guidance.

The Insolvency and Trustee Service(external link) and Federation of Family Budgeting Services(external link) may also be able to help if you are in financial difficulty.

Common situations

Unsolicited home loan offer

Lisa receives an offer in the mail for an unconditional fixed rate mortgage with pre-approval if she applies online. If the lender failed to make reasonable enquiries about her ability to make the repayments before approving the loan, this would be a breach of the responsible lending principles and the code. If Lisa had difficulties making the payments, she could complain to the Banking Ombudsman to get the mortgage varied or cancelled.

Fixed rate

Nicky gets a two-year fixed rate mortgage and is happy with the interest rate for the first year. Then the interest rate decreases a lot and she decides to remortgage with a different lender at a lower rate. She will have to pay the break fees that her first bank works calculates to cover their reasonable costs.