New Zealand’s mortgage market offers several distinct loan types and structures. Most borrowers end up with some combination — a “split” between different structures — rather than choosing just one. This guide explains each type, how it works, and who it suits.
The Two Fundamental Rate Types
1. Fixed Rate Mortgage
You lock your interest rate in for a set term — typically 1, 2, 3, or 5 years. During that term, your rate and repayment amount are certain regardless of what happens to market interest rates.
Best for: Borrowers who want certainty and predictability; those who believe rates will rise during their fixed term.
Trade-off: Break fees apply if you exit the fixed rate early. No automatic benefit if rates fall.
Current indicative fixed rates (April 2026):
- 1-year: ~5.55%
- 2-year: ~5.45%
- 3-year: ~5.69%
- 5-year: ~5.89%
See Fixed Rate Mortgage NZ for a complete guide.
2. Floating Rate Mortgage
Your interest rate moves with market conditions — specifically with the Reserve Bank’s OCR and bank funding costs. Repayments change as the rate changes.
Best for: Borrowers expecting rates to fall; those who want no break fee flexibility; those expecting to make large lump-sum payments.
Trade-off: Higher rate (currently ~7.09%) than fixed rates. No rate certainty.
See Floating Rate Mortgage NZ for a complete guide.
The Two Fundamental Repayment Types
3. Table Loan (Principal and Interest)
The standard NZ mortgage structure. Equal regular repayments over the loan term, with each payment covering interest and reducing the principal. Early in the loan, most of each payment is interest; later, more is principal.
Best for: Almost everyone — it’s the default structure that systematically builds equity.
See How Home Loans Work in NZ for amortisation mechanics.
4. Interest-Only Mortgage
Repayments cover only the interest — the principal balance doesn’t reduce. At the end of the interest-only period, the loan switches to principal-and-interest (resulting in higher repayments, called “repayment shock”).
Best for: Investors maximising deductible interest expense; construction periods; temporary financial hardship.
Caution: RBNZ restrictions mean interest-only is very limited for owner-occupiers in NZ. Investors can access it for up to 5 years.
See Interest-Only Mortgage NZ for a complete guide.
Product Types by Account Structure
5. Revolving Credit (Offset) Mortgage
Functions like a large overdraft. You can deposit and withdraw funds within the credit limit. Interest is calculated daily on the net balance — the lower your average balance, the less interest you pay.
Best for: Disciplined borrowers with variable or high income; those who want to use everyday savings to reduce mortgage interest.
Trade-off: Requires financial discipline — the account can also be used to increase debt. Usually carries the floating rate.
NZ bank product names: ANZ FlexiHome, ASB Orbit, BNZ TotalMoney, Westpac Choices Everyday, Kiwibank Offset Home Loan.
See Revolving Credit Mortgage NZ for a complete guide.
6. Split Mortgage
A mortgage divided into two or more portions, each with a different structure — e.g., 70% on a 2-year fixed rate, 30% on revolving credit. This is the most common structure for NZ borrowers with larger loans.
Why split?
- Rate certainty on the fixed portion
- Flexibility and lump-sum access on the revolving/floating portion
- Hedge against getting the rate direction wrong
- Ladder multiple fixed terms to stagger rollover dates
Best for: Almost all borrowers with loans above $300,000 — the split is almost always better than going 100% fixed or 100% floating.
See Split Mortgage NZ for a complete guide.
Specialist Products
7. Construction Loan
A short-term loan releasing funds in staged drawdowns as a building progresses. Converts to a standard term mortgage when the Code of Compliance Certificate is issued.
See Construction Loan NZ.
8. Bridging Loan
Short-term finance used to bridge the gap between purchasing a new property and receiving the proceeds from selling your existing property. Allows you to buy before you sell.
Typical term: 3–6 months, sometimes up to 12 months. Rate: Usually floating rate or higher. Risk: If your existing property doesn’t sell quickly, bridging costs accumulate.
9. Guarantor Mortgage
Uses a family member’s property as additional security, allowing borrowing with a smaller deposit (or no deposit). The guarantee is typically structured as a limited amount and can be released as equity grows.
Choosing the Right Structure
| Situation | Recommended structure |
|---|---|
| Standard PAYE income, first home | 70–80% fixed (2-year) + 20–30% floating or revolving credit |
| High income, very disciplined | 30–50% revolving credit + balance fixed |
| Rate certainty priority | 100% fixed (1–2 years in current environment) |
| Expecting large windfalls | Large floating/revolving credit component |
| Investor | Fixed + interest-only on investment, P&I on home |
| Building | Construction loan, then decide structure at completion |
There’s no universally right answer — your structure should reflect your income stability, expected cash flows, risk tolerance, and current rate environment.
Further Reading
- Fixed Rate Mortgage NZ — how fixed rates work
- Floating Rate Mortgage NZ — floating rate mechanics
- Revolving Credit Mortgage NZ — offset/revolving credit
- Interest-Only Mortgage NZ — IO lending
- Split Mortgage NZ — combining structures
- NZ Mortgage Rates — current rate comparison
- Mortgage Hub — all NZ mortgage guides