Lending Guide
Fixed, floating, split, revolving credit, offset — there's a lot of jargon in the mortgage world. This guide breaks down every main mortgage type available in New Zealand, plain and simple.
In this guide
The most common mortgage in New Zealand
A table mortgage (also called a standard principal-and-interest mortgage) is the default structure for most New Zealand home loans. Your repayments are set at a fixed amount — the same payment every week, fortnight, or month — and each payment covers both interest and a portion of the principal.
Early in the loan, most of each payment goes towards interest. As the principal reduces over time, the interest portion shrinks and more of each payment goes towards paying off the loan itself. By the end of the term — typically 25–30 years — the loan is fully repaid.
On a $600,000 mortgage at 6.5% over 30 years, your monthly repayment is approximately $3,792. In month 1, roughly $3,250 of that is interest and only $542 reduces your principal. By year 15, those figures start to even out. By the final years, most of each payment is principal. The bank charges interest on the remaining balance — so the faster you reduce the principal, the less interest you pay overall.
Pros
Cons
Certainty and protection — for a set period
With a fixed rate mortgage, your interest rate is locked in for a chosen term — typically 6 months, 1 year, 2 years, 3 years, or 5 years. Your repayments won't change during that period, regardless of what happens to interest rates in the market.
At the end of the fixed term, you can refix at the current rate for another term, switch to a floating rate, or restructure your loan entirely. If you don't proactively refix, your loan will automatically roll to your bank's floating rate.
There's no universally correct term — it depends on where rates are and where they're expected to go. In a rising rate environment, locking in for longer gives protection. In a falling rate environment, shorter terms let you refix at lower rates sooner. Many borrowers split across multiple terms to hedge both directions — for example, half fixed for 1 year and half fixed for 2 years.
Current NZ fixed rate terms available:
Pros
Cons
Maximum flexibility — rate moves with the market
A floating rate mortgage has an interest rate that can change at any time, typically moving in line with the Reserve Bank's Official Cash Rate (OCR). When the OCR goes up, your floating rate usually goes up. When it falls, your rate should drop too.
Floating rates are generally higher than comparable fixed rates — you pay a premium for the flexibility. However, there are no break fees, and you can make unlimited extra repayments at any time.
Pros
Cons
The best of both worlds — most popular structure
A split mortgage divides your loan into portions, each on different rate types or terms. The most common split is a fixed rate portion (for certainty) plus a floating portion (for flexibility and extra repayments). You can also split across multiple fixed terms — for example, $300,000 fixed for 1 year and $300,000 fixed for 2 years.
Splitting across terms staggers your refixing dates, so you're not committing your entire loan to a single rate decision. If one portion comes up at a good time, you benefit — if not, the other portion is still protected.
$600,000 mortgage at 6.5%:
This is just one example. The right split depends on your situation, income, and goals. We'll model this with you.
Pros
Cons
Mortgage as a giant flexible overdraft
A revolving credit facility combines your mortgage and everyday banking into one account. You have a set credit limit (your mortgage balance), and you can deposit and withdraw freely — just like a transaction account. Interest is charged daily on the outstanding balance, so any money sitting in the account reduces what you're paying.
The key benefit: every dollar you hold in the account saves you interest. If your salary is deposited here and your expenses leave throughout the month, your balance is lower on average — meaning less interest charged daily. Over 30 years, this can be significant.
$500,000 revolving credit at 7% p.a. = $95.89 interest per day. You deposit your $10,000 monthly salary at start of month and spend $8,000 during the month. Your average daily balance is $496,000 (not $500,000). Daily interest: $95.12 — a saving of $0.77/day, or $281/year, just from your salary sitting there for the month.
Small on its own, but if you maintain $30,000+ consistently, the savings compound meaningfully across the loan term.
Pros
Cons
Savings that work against your mortgage balance
An offset mortgage links your savings and transaction accounts to your home loan. Interest is calculated on the difference between your mortgage balance and the balance of your linked accounts. You keep your savings separate — they're always accessible — but you pay interest as if your mortgage were smaller.
You have a $500,000 mortgage at 6.5% p.a., and $40,000 sitting across your savings and everyday accounts. With an offset, interest is charged on $500,000 − $40,000 = $460,000. That $40,000 effectively earns the equivalent of 6.5% interest — tax-free — rather than a taxable 4–5% in a savings account.
Saving $40,000 × 6.5% = $2,600/year in avoided interest. Over 30 years, the compounding impact is significant.
Pros
Cons
Lower repayments — but no equity building
With an interest-only mortgage, your repayments cover only the interest charges — the principal balance doesn't reduce. Repayments are lower than a principal-and-interest loan, but the full balance remains outstanding at the end of the interest-only period.
Interest-only terms are usually granted for up to 5 years in New Zealand. After that, the loan converts to principal-and-interest repayments — which can result in a significant jump in repayment amounts if the term has shortened but the balance hasn't reduced.
Pros
Cons
The honest answer is: it depends on your situation, goals, and how much certainty vs flexibility you need. There's no single right answer — which is exactly why getting professional advice matters.
Here's a rough guide to help you start thinking:
First home buyer
A split structure — some fixed for certainty while you adjust to repayments, and a small floating portion for flexibility — is a common starting point. We'll model the numbers with you.
Want to pay it off fast
Fix most of the loan for a competitive rate, and keep 20–30% floating or revolving for unlimited extra repayments. Every extra dollar you throw in reduces your principal immediately.
Property investor
Interest-only can suit investors managing cash flow across multiple properties. Offset or revolving structures also work well when rental income sits idle between tenancies.
Self-employed or variable income
A revolving credit or offset structure works naturally — money sitting in your account reduces daily interest automatically. Fix a portion to keep certainty when income is lower.
Refinancing or refixing
A refix is the best time to review your whole structure. We'll model different term and rate combinations — and find if a restructure could save you money over the remaining loan term.
This guide is general in nature and is not financial advice. Mortgage structures, rates, and eligibility vary by lender and individual circumstances. Always seek advice specific to your situation. Read our disclosure statement →
