Credit cards and borrowing: how card limits cut your home loan

Credit cards affect a home loan even if you pay them off every month. Under the Reserve Bank’s debt-to-income (DTI) rule, banks count the limits of your credit cards and overdrafts as debt, not the balance you owe (Kiwibank). Most owner-occupier lending must keep total debt at or below 6 times gross income, so every $1 of card limit is $1 less you can borrow when DTI is the binding limit. For a single buyer on $100,000 a year, $25,000 of card and overdraft limits lowers the DTI limit from $600,000 to $575,000. How banks count cards in their affordability (serviceability) test is a separate question, and no bank we read publishes its method. Banks decide; this is general information, not financial advice.

Limits count, not balances

The DTI rule has applied since 1 July 2024. Kiwibank explains what goes into the debt side: existing home loans, personal debts such as car loans, and student loans, plus “the limits of any credit cards and overdrafts, plus any new loans being considered”. The income side is your total gross income before tax, including salary, rental income and other income. “Your DTI ratio is calculated by dividing your total debt by your total gross income.”

The reason banks use the limit is that you could draw the whole limit tomorrow without asking anyone. A card with a $15,000 limit and a $0 balance is $15,000 of debt you could have by the weekend. So, for DTI purposes:

• A $10,000 card you clear every month counts as $10,000.
• A $2,000 overdraft you never use counts as $2,000.
• A store card or second card counts too, at its full limit.

Our debt-to-income ratio guide explains the rule in full, including the speed limit that lets banks lend above 6 times income for up to 20% of new owner-occupier lending.

Worked example: card limits and the DTI ratio

Take a single buyer on $100,000 a year before tax, with no car or student loan. They have a $15,000 credit card, an $8,000 credit card and a $2,000 overdraft: $25,000 of limits in all.

With all three facilities, a $580,000 loan takes total debt to $605,000 and the ratio to 6.05, which is a high-DTI loan. A bank can still make it inside its 20% speed-limit allowance, but it does not have to. Cutting the limits to a single $5,000 card brings the ratio to 5.85, inside the standard limit, with no change to income or spending. Exactly 6 counts as within the rule; above 6 is high.

Our DTI calculator lets you enter each card and overdraft separately.

The same buyer, all three limits

DTI is one of three limits. Here is the same buyer through our full engine: take-home pay about $5,989 a month (2026/27 tax, ACC and 3.5% KiwiSaver), living costs of $2,000 a month, a $200,000 deposit, tested at the 6.94% average of the five banks’ test rates over 30 years.

Here DTI binds in every row, so the card limits come straight off the answer: $20,000 of cancelled limits means $20,000 more borrowing. Note that our serviceability figure does not change. That is a deliberate choice, explained next, and a real bank may well reduce serviceability too.

Cards in the affordability test: not published

Banks also check whether you could afford all your repayments at their test rate, after living costs. For a car loan that is easy: the bank uses the repayment. For a card with a limit and no fixed repayment, the bank has to assume one. No bank page we read publishes the share of a card limit it treats as a monthly cost, and the research behind this site found none. BNZ says only that it may adjust what you tell it after comparing with internal benchmarks.

Because we cannot source a figure, our calculator counts card and overdraft limits for DTI but not as a monthly cost in serviceability. That is stated on our methodology page. If you want to allow for it, enter an amount in the “other debt repayments” box. To show the scale, here is what each extra dollar a month of assumed repayment does to the serviceability limit at the 6.94% average test rate over 30 years:

These are illustrations of the maths, not bank figures: we do not know what any bank assumes. The point is the ratio. Each $100 a month that a bank treats as committed is roughly $15,000 of borrowing at today’s average test rate. Our guide to bank test rates explains why that ratio depends on the rate.

Student loans and other debts work the same way

Cards are not the only debt that surprises people. Kiwibank’s list of what counts for DTI includes student loans and personal debts such as car loans, at their balance. A student loan also reduces take-home pay, because IRD deducts 12% of income above the repayment threshold ($24,128 a year for 2026/27) from each pay. So it can hit two limits at once.

Take the same $100,000 buyer with one $5,000 card, then add a $30,000 student loan:

The student loan deduction of about $758.68 a month lowers take-home pay, and serviceability falls by over $114,000, enough to make it the binding limit. The $30,000 balance also takes $30,000 off the DTI limit. Unlike a card limit, you cannot simply cancel a student loan, but it helps to know its effect before you set your price range.

What you can do about it

• List every facility. Banks see your credit file and statements, so include every card, store card, overdraft and buy-later account you hold. A missing card found later can delay or change an approval.
• Reduce limits you do not need. If a card’s limit is far above what you spend, ask the card provider to lower it. Ask for written confirmation of the new limit to show the bank.
• Close spare cards and overdrafts. A facility you never use still counts in full for DTI.
• Avoid new credit before settlement. A new card or loan after pre-approval can shrink the amount you were approved for.
• Keep paying in full. Clearing cards each month does not change the DTI count, but it keeps your statements clean, which helps when a bank reviews your spending.

Lowering limits only helps when DTI or serviceability binds. If your deposit is the tighter limit, card limits change little; our how much can I borrow guide explains which limit binds and why.

Rates as at 10 November 2026; test rates confirmed July 2026.

Questions people ask

Do credit cards count as debt if I pay them off every month?

Yes, for the DTI rule. Kiwibank says total debt includes the limits of any credit cards and overdrafts, so a card you clear every month still counts at its full limit.

Does an unused overdraft affect my home loan?

Yes. The overdraft limit counts as debt for DTI even if you never use it. For a buyer on $100,000, a $2,000 overdraft takes $2,000 off the DTI limit.

Should I cancel my credit card before applying for a mortgage?

If you do not need it, reducing or closing it can raise your DTI limit by the amount of the limit. Keep written confirmation of the change. Banks decide how they treat each facility.

How do banks count card limits in the affordability test?

They do not publish it. Our calculator leaves card limits out of serviceability and lets you add an amount yourself. At the 6.94% average test rate, each $100 a month counted against you is about $15,122 less borrowing.