If you're buying your first home in New Zealand, you’ve probably already discovered that mortgages aren't one-size-fits-all. Between fixed rates, floating rates, revolving credit, table loans, and interest-only options, it can all feel a bit overwhelming.
Choosing the right type of mortgage is one of the most important financial decisions you'll make as a first-home buyer. It affects your repayments, your flexibility, and how much interest you’ll pay over time. The good news is you don’t have to navigate this alone.
At Luminate Financial Group, we help first-home buyers structure their loans in a way that suits their goals, income, and lifestyle. In this guide, we break down the main mortgage types and help you understand what might work best for your situation.
Fixed Rate Mortgage
This is the most common type of home loan for first-home buyers in New Zealand. With a fixed rate, your interest rate and repayments stay the same for a set period — usually between six months and five years.
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Pros |
Cons |
| You know exactly what your repayments will be, which makes budgeting easier. You're also protected from rising interest rates during the fixed term. | If interest rates drop, you're locked into a higher rate until your fixed term ends. There can also be break fees if you want to make large lump-sum repayments or refinance early. |
When it works best:
Fixed rates are ideal if you value certainty and want to keep your repayments consistent, especially in the early years of home ownership when your budget might be tight.
Floating (Variable) Rate Mortgage
A floating rate mortgage means your interest rate can go up or down at any time, depending on the market and your lender’s pricing.
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Pros |
Cons |
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You can make extra repayments without penalty, repay your loan early, or refinance more easily. If rates fall, your repayments may decrease. |
If rates rise, your repayments go up too. This can make budgeting more difficult and create financial stress if you haven’t built in a buffer. |
When it works best:
Floating loans suit buyers who want flexibility to pay their mortgage off faster or who expect interest rates to drop. Many first-home buyers combine a small floating portion with a larger fixed loan to allow some repayment flexibility.
Revolving Credit Mortgage
A revolving credit mortgage works like a large overdraft. Your income is paid directly into the loan account, and you use it as your main transaction account. Interest is charged daily on the outstanding balance.
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Pros |
Cons |
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If you manage your spending carefully, you can reduce the average daily balance and pay off your loan faster. It gives you complete repayment flexibility and easy access to surplus funds. |
It requires financial discipline. If you tend to spend everything that’s available, you might not reduce your loan at all. It can also be harder to track progress unless you’re closely monitoring your balance. |
When it works best:
Revolving credit works for buyers with strong budgeting habits, stable income, and a goal of paying down their loan quickly. It’s often used alongside a fixed or floating loan, not on its own.
Offset Mortgage
An offset mortgage is similar to revolving credit, but instead of one account, your savings and transaction account balances are offset against your mortgage balance. You only pay interest on the difference.
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Pros |
Cons |
| You reduce the interest charged on your mortgage without locking money away. It gives you flexibility and can be a great tool for saving interest over time. | Not all lenders offer offset accounts. You also need to keep a meaningful balance in your savings or transaction accounts to make it worthwhile. |
When it works best:
Offset mortgages suit buyers who consistently maintain savings or cash buffers and want interest savings without restricting access to their money.
Table Loan (Principal and Interest)
This is the standard structure for most mortgages in New Zealand. With a table loan, you make regular repayments that cover both interest and principal over time. At the end of the term, the loan is fully paid off.
| Pros | Cons |
| Your debt reduces consistently over time. The repayments are structured to repay the full loan by the end of the term, usually 25 to 30 years. | Repayments are usually higher at the start than interest-only loans. You have less short-term cash flow flexibility. |
When it works best:
This is the go-to structure for first-home buyers. It helps build equity steadily and aligns with responsible lending principles under New Zealand’s Credit Contracts and Consumer Finance Act (CCCFA).
Interest-Only Mortgage
With an interest-only mortgage, you only pay the interest on your loan for a set period (typically one to five years). Your repayments are lower, but the loan balance doesn’t reduce.
| Pros | Cons |
| Lower repayments can help with short-term cash flow. This can be useful if you're renovating, have variable income, or want to reduce pressure early on. | You aren’t paying off the loan principal, so you won’t build equity unless the property value increases. Once the interest-only period ends, repayments increase significantly. |
When it works best:
Interest-only loans are more common with property investors than first-home buyers. However, they may suit some buyers in unique situations, such as self-employed borrowers with lumpy income or buyers planning to sell or restructure soon.
Which Mortgage Is Right for You?
There’s no single right answer. The best mortgage structure depends on your goals, income stability, risk tolerance, and lifestyle. Most first-home buyers choose a mix of fixed and floating to balance stability and flexibility. For example, you might fix 80 percent of your loan for two years and keep 20 percent on a floating rate so you can make extra repayments or reduce debt faster.
At Luminate, we tailor every home loan structure to your situation. We look at your goals over the next one, three, and five years and recommend a setup that supports your financial wellbeing without unnecessary restrictions or risk.
Final Thoughts
Understanding the different mortgage types helps you make smarter decisions about your loan. Whether you're after stability, flexibility, or a mix of both, choosing the right structure from day one can save you thousands over the life of your loan.
This isn’t a decision to make based on headlines or your mate’s advice. Talk to an experienced adviser who understands the full picture and who can walk you through your options.
Want to know which mortgage structure fits your life?
Book a free First-Home Mortgage Session with Luminate.
We’ll assess your goals, explain your options in plain language, and help you lock in the right loan for your first home.
Visit www.luminate.co.nz | Email us at askus@luminate.co.nz | Call 0800 333 400