Understanding a home loan

The money you borrow to purchase your home is called the principal, this is what you'll pay interest on.

You'll pay back your home loan over a set term, this is called your loan term. Your loan term can be a maximum of 30 years.

When you’re deciding how to structure your home loan, you’ll need to consider the type of home loan, term of home loan, amount you can afford to pay back in repayments and the frequency of the repayments.

Watch the below video to get an understanding of your options.

Loan types

Before you decide on how to structure your home loan, you should know the difference between home loan types. Options include fixed, variable, revolving credit and offset.

TIP: The quicker you can reduce the principal, the less interest you'll pay in the long run.

Fixed interest rate

  • Are fixed for a set period of time, you'll be able to pick a term from six months to five years.
  • It gives you certainty about how much your repayments will be.
  • You can choose to make extra repayments, up to 5% of the balance at time of fixing per annum over the fixed term of the loan.
  • Prior to the end of the term, we'll contact you to see what you'd like to do, otherwise it will automatically move to a variable rate unless you re-fix another rate for a set term.
Read more about fixed rate home loans

Variable interest rate

  • A variable interest rate is also known as a floating interest rate.
  • The interest rate can increase or decrease from time to time.
  • Your repayments will be based on the variable interest rate, at the time your repayment goes out.
  • You can vary your payments and make lump sum payments without being penalised.
  • You can fix all or part of a variable loan anytime.
Read more about variable rate home loans

Revolving credit loans

  • Works kind of like a large overdraft - pay it off or withdraw up to your limit at any time.
  • Your pay (and any other money you want) goes straight into the account, and your bills and payments come out – so your loan is always moving up and down.
  • You pay interest on your average daily balance and interest is charged at the end of the month.
  • The interest rate is set at the revolving variable interest rate.

The idea is you'll save on interest by keeping your revolving balance as low as possible — interest is calculated daily.

Read more about revolving credit home loans

Offset mortgage

  • With an offset mortgage, you can offset the balance of your Kiwibank savings and everyday accounts against your offset loan – so you only pay interest on the difference.
  • You can link up to eight accounts to the offset portion of your loan (including family members’ accounts) – so you’ll save more in interest the more you have in the linked accounts.
  • The interest rate is set at the offset variable interest rate.
  • You won't earn interest, on your linked accounts, if they're savings accounts. But the savings you'll make should outweigh any interest you would have earned on those accounts.
Read more about offset mortgages

You can choose to do a mix and match of the above. We can help you figure out how to split up your loan.


Talk to a home loan expert - we're here to help

At any stage of your home buying journey, our home loan experts are available to give you obligation-free advice and guide you through the process right to the end.

Our Mobile Mortgage Managers can come to a location of your choice and our Banking Consultants are available your local Kiwibank branch. Our home loan team is also available by calling 0800 000 654 between 8am and 6pm, Monday to Friday.

The information on this page is intended as general information only. It doesn’t take into account your financial situation and goals and isn’t personal advice.