Home Loan Types Explained: Which One Suits You?

Choosing the right loan type can make a genuine difference to both your repayments and your flexibility over the life of your mortgage. Most borrowers end up using more than one type at once, here’s a plain-English rundown of the main options available in New Zealand today.

Fixed-Rate Loan

This option offers a locked-in interest rate for a set term, so your repayments stay the same throughout the fixed period. Useful for budgeting certainty. Fixed terms typically range from 6 months out to 5 years, with 1–3 year terms currently the most commonly chosen, particularly while the interest rate outlook remains a little uncertain heading into 2027.

Floating-Rate Loan

This type offers more flexibility, with an interest rate that moves with the market. Repayments can change over time, but floating loans let you make extra repayments or repay the loan in full at any point without a break fee. Useful if you’re expecting a lump sum, planning to sell, or simply want the freedom.

Table Loan

This is the most common structure for a standard home loan, with repayments made fortnightly or monthly. Early in the loan, most of each repayment goes toward interest; over time, more goes toward paying down the principal. Most owner-occupiers use this structure, generally as a principal and interest (P&I) loan.

Revolving Credit Loan

This works like a large overdraft attached to your property. You have an approved limit, can draw down and repay at any time, and interest is calculated daily on the balance, so keeping the balance as low as possible directly reduces your interest cost. This suits disciplined borrowers who want maximum flexibility, but can work against you if you’re not actively managing the balance.

Offset Loan

An offset loan links your everyday bank accounts to your mortgage, reducing the loan balance interest is calculated on. For example, if you have a combined daily balance of $10,000 across your linked accounts and a loan balance of $60,000, you’d only pay interest on $50,000 that day, recalculated daily across your linked accounts. This can meaningfully reduce interest costs for borrowers who keep healthy account balances, without locking that money away the way extra repayments would.

Interest-Only Loan

These loans cover only the interest for a set period, with the principal balance unchanged until that period ends. This frees up cash flow in the short term, but you’ll need a clear plan for repaying the principal once the interest-only period finishes. Banks assess interest-only applications more carefully than standard table loans, particularly for owner-occupiers, and generally want to see a specific reason and repayment plan attached to the request. It remains a common strategy for investors, especially now that interest on residential rental lending is once again fully tax-deductible.

You Don’t Have to Pick Just One

A lot of borrowers assume they need to choose a single structure for their entire mortgage. In practice, splitting your loan across two or three of these types. For example, most of it on a fixed table loan with a smaller portion on revolving credit for flexibility, is a common and often sensible approach, giving you both budgeting certainty and room to manoeuvre.

Frequently Asked Questions

What’s the difference between an offset loan and a revolving credit loan? A revolving credit loan is a single facility you draw down and repay directly, like an overdraft. An offset loan keeps your everyday accounts and mortgage separate, but uses your account balances to reduce the interest charged on your mortgage.

Can I combine a fixed loan with a revolving credit or offset facility? Yes, this is a very common structure, giving you rate certainty on the bulk of your lending while keeping some flexibility on a smaller portion.

Is interest-only still available for owner-occupiers in New Zealand? Yes, but banks assess these applications more carefully than standard principal and interest lending, and generally want a clear reason and a plan for repaying the principal down the track.

Not Sure Which Structure Fits Your Situation?

The right combination depends on your income, goals, and how disciplined you want your repayments to be. Get in touch and we’ll walk through what structure makes the most sense for you.

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