Home Loan Types

Choosing the right loan type can make a big difference. This guide explores some of the most common loan options.

Fixed-rate loan: This option offers a locked-in interest rate for a set term. Your repayments will stay the same throughout the fixed period, providing predictability and budgeting ease. Fixed-rate terms typically range from 1 year to 5 years.

Floating-rate loan: This type of loan offers more flexibility, but with interest rates that can fluctuate with the market. While your repayments may change, floating-rate loans can offer more flexibility when repaying your loan.

Table loan: This is the most common type of home loan. Repayment frequency can be fortnightly or monthly. During the start of the loan, most of your repayments go towards paying off the interest, and over time, more of your loan repayments will go towards paying off the principal.

Revolving credit loan: This loan works like a large overdraft. You have an approved limit you can go up to and can make repayments at any time. Interest is calculated daily on the balance, so keeping the loan balance amount as low as possible will reduce interest costs.

Offset loan: Link your bank accounts to your offset loan, saving you on interest costs. For example, if you have a daily balance across your bank accounts of $10,000 and a loan balance of $60,000, you would only pay interest on $50,000 that day. The calculation is made daily, looking at the group balance across your bank accounts.

Interest-only loan: These loans focus solely on paying the interest on your mortgage, with the principal remaining unchanged during the interest-only period. This can free up cash flow initially, but remember, you’ll eventually need a repayment plan to cover the principal amount.

Blue Water Mortgages, New Plymouth, Taranaki.