Mortgages in New Zealand - Mortgage Types
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Mortgages Types in New Zealand
The types of mortgages available to borrowers in New Zealand are as follows.
Table
A table mortgage is the most popular choice of mortgage for buyers in New Zealand.
The buyer is required to payback a fixed monthly amount for the duration of the loan (the amount will vary a little if buyers fail to fix their interest rate), with most money repaid in the first few years going towards interest payments before going towards reducing the capital lump sum borrowed.
Revolving credit
This type of mortgage is similar to having a large overdraft and is suited for those who are strictly ordered with their finances and seek a fast way of paying off their mortgage.
The buyer’s entire wage and any lump sums they wish to make are placed into their mortgage account and cancel out the equivalent amount of debt. The buyer is then able to pay bills and withdraw money from the account up to the limit of the mortgage*.
It is important to remember that good lenders push down the limit available to impose a fixed time limit for the repayment of the mortgage.
Reducing
A reducing mortgage requires higher initial payments, which tends to put off borrowers. The capital borrowed is repaid along with reducing amounts of interest, resulting in a mortgage that starts high and gradually reduces.
Interest only
An interest-only mortgage is generally taken out by people who want to keep their mortgage payments as low as possible in order to get themselves in a strong financial position. However, it is generally advised that these mortgages are only taken out with a savings policy, which is used by the home owner to pay off the principal debt at the end of the mortgage term.
Back: New Zealand mortgage guide
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