clearpathadvisory-co-nz

First Home Buyers Guide

Fri, 31 Jul 2026 23:34:18 GMT

First Home Buyers Guide

What you'll find in this guide!

1. About this guide

2. How Much Can I Borrow?

3. How Much Deposit Do I Need?

4. Kainga Ora First Home Loan - 5% Deposit

5. Can I Use KiwiSaver For My Deposit

6. Getting A Pre-Approval

7. What are the Costs When Buying a Home

8. Choosing the Right Type of Mortgage

9. Making an Offer / Going Unconditional and Settling

10. Wrapping It All Together

1. About this guide

This guide includes a short video at the beginning of each section, if you’d rather watch than read.

Buying your first home is an exciting step, but it can also feel confusing and overwhelming.

We wrote this guide to break the process down into simple, easy-to-understand steps so you know what to expect at each stage. Whether you’re just starting to save your deposit or you’re ready to buy, this guide will help you work through each step of the journey.

We've designed this so you can read the guide or watch the videos or both, whatever you find easiest.

Key Insights

Don’t forget that navigating through these steps and explaining them to clients is a mortgage advisers’ job.
It’s a complex journey where you need to work together, not just with your mortgage adviser but with other professionals too.
You should feel comfortable with any professional adviser you engage.

2. How Much Can I Borrow?

Before you start looking at properties, it’s important to understand how much you can borrow. The way you find out is by applying for a pre-approval. So it's really helpful to know how the bank will assess your application i.e. what are they looking for?

In a nutshell, the banks care about how much deposit you’ve saved and your ability to pay off the loan i.e. how much you earn minus how much you spend.
Banks call this security (deposit) and servicing (amount you can afford to pay).

Key Insights

Account Conduct and Expenses

You must have 3 months of good bank account conduct; this means no failed payments on your bank statements. Banks look at your spending habits via your bank statements to check you can pay your expenses.

Income and Stability

Lenders like steady provable income, a salaried job with consistent history is viewed more favourably than irregular income. Self-employed buyers can get mortgages but need to show reliability of income via their financials.

Existing Debt

When calculating your credit card debt, banks usually take your limit as opposed to your outstanding balance. They’ll also consider “Buy now pay later”, car loans and student loans. All of which will reduce the amount you can borrow.

Want to know what you could borrow?

Online calculators can provide an estimate, but lenders assess every application differently. I can review your income, deposit and existing commitments and help you understand what may be achievable.

Book to chat with Mike about your borrowing position

3. How Much Deposit Do I Need?

Your deposit is one of the biggest factors when getting approved for a home loan. If you’ve saved a healthy deposit that’s an indicator to the bank that you’ve learned financial discipline i.e. you can manage your finances.

20% Deposit

In New Zealand banks generally prefer you provide 20% deposit when buying a home.

If you have a 20% deposit you get access to the best interest rates the bank offers and you have a better chance of getting approval for the amount you’re looking to borrow.

10% Deposit

Banks will lend below 20%, down to 10% depending on your financial position and ability to repay. Banks are restricted on the amount of this type of lending they can do i.e. it has to be a small part of their overall loan book.

If you have less than a 20% deposit, you may not qualify for a lender's special interest rates.
Depending on the lender, you may instead pay a higher interest rate or, in some cases, a low equity margin or premium.
It will be harder to get approved

5% Deposit

Yes, you can buy a house with 5% deposit, see our Kāinga Ora section below.

Key Insights

Low Equity Costs More

You should have a good reason for borrowing with a 10% deposit. You’re paying a higher interest rate on a bigger amount, so there should be a good reason for you doing that as opposed to deferring the purchase until you build up to a 20% deposit.
When you have less than 20% deposit banks require you to get a registered valuation report as part of the approval process for the loan. Your mortgage adviser must arrange this for you via a portal of approved valuers (approx. cost $800 - $1,200 for a standard house).

4. Kāinga Ora First Home Loan - 5% Deposit

Kāinga Ora is a government-owned organisation that helps eligible first home buyers purchase a home with a deposit as low as 5%. It does this by providing a guarantee to participating lenders (banks), reducing their risk and making low deposit lending possible.

Not all lenders offer Kāinga Ora First Home Loans, and there is strict eligibility criteria set by both the lender and Kāinga Ora.
The Kāinga Ora website provides the most up-to-date information on eligibility requirements and participating lenders.

As you are purchasing with less than 20% deposit, a registered valuation is usually required as part of the lending approval process. Your mortgage adviser will coordinate this process with the lender. The typical cost of a registered valuation is approximately $800 to $1,200.

To help cover the additional risk associated with low-deposit lending, Kāinga Ora charges a Lenders Mortgage Insurance (LMI) premium. This fee is currently 1.2% of the loan amount (as at 11/8/2026) and can usually be added to the mortgage rather than paid upfront.

Key eligibility requirements include

You must be a New Zealand citizen, permanent resident, or resident visa holder.
You must be buying your first home (or qualify under Kāinga Ora's second-chance buyer criteria) and intend to live in the property.
Your before-tax income over the previous 12 months must be no more than $95,000 for an individual or $150,000 for two or more buyers (at the time of writing – refer to the Kāinga Ora website for current limits).
You must have a good credit history and a stable income, as the standard lending criteria still apply.

5. Can I Use My KiwiSaver For My Deposit?

Yes, KiwiSaver is one of the most common ways first home buyers build their deposit. This is a great way to increase your deposit and get into a home earlier than you could if you had to save that money.

There’s also the great advantage that if you’re doing this in your twenties you still have a large portion of your working life to build your KiwiSaver back up again.

Key Insights

When applying for pre-approval, your adviser may recommend obtaining a confirmation letter from your KiwiSaver provider showing your estimated withdrawal entitlement. Banks will accept this letter as proof you’re eligible to withdraw your KiwiSaver.
Using KiwiSaver for your first home is a withdrawal not a loan, so you don’t ever pay it back.
Once approved, your provider doesn’t pay the funds to you, they pay it directly to your solicitor’s trust account. Our solicitor applies the funds to your deposit or settlement amount.
You cannot withdraw your entire balance; you must leave $1,000.

6. Getting Pre-Approval

What is a pre-approval?

A pre-approval application is where you submit all the information normally required for a home loan application, except you haven't yet found a property or signed a Sale and Purchase Agreement.

The bank assesses your financial situation and advises how much you may be able to borrow, providing a conditional pre-approval letter outlining the approved amount and any conditions that must be met. One of the key conditions is that the bank must approve the property you choose before confirming your loan.

Benefits of getting pre-approval

You know your price range, so can realistically look for suitable houses
You can move quickly when you find a property, going unconditional and settling will be faster
Sellers and agents see you as a serious buyer. This is for good reason as you have completed the bulk of the work around applying for a loan.
Pre-approvals typically last 60 to 90 days and can be extended.

Thinking about getting pre-approved?

I can help you understand the information lenders will require, assess your options and prepare your application for the most suitable lender.

Arrange a no-obligation first conversation

Or contact me directly:

Mike Fraher, Financial Adviser
Phone: 021 954 956
Email: mike@clearpathadvisory.co.nz

7. What are the Costs When Buying a Home

Mortgage Adviser Cost

Most mortgage advisers are paid a commission by the lender when they arrange a mortgage and therefore do not usually charge clients directly for their services. However, every adviser must disclose how they are remunerated and whether any fees may apply.

When speaking with a mortgage adviser, it's a good idea to ask how they are paid and whether any fees may apply. This allows you to compare advisers and choose someone who is the right fit for your needs.

Don't be afraid to contact a mortgage adviser and ask questions. A good adviser will be happy to explain the home-buying process, answer your questions and help you understand your options.

Other Costs to Budget For

Key Insight

Having a financial buffer for these costs can make the process smoother and reduce pressure when making important decisions.

8. Choosing the Right Type of Mortgage

This is one of the areas where your mortgage adviser can add significant value. The way you structure your mortgage can have a meaningful impact on your financial position over time.

There are many different ways to structure a home loan. A mortgage adviser's job is to understand your financial circumstances, explain your options, and help you choose a mortgage structure that supports your goals.

Types of Mortgages

Fixed Rate Loans

Your interest rate is locked in for an agreed period (for example, 1–5 years). This provides certainty, as your repayments won't change during the fixed term. Banks generally allow some extra payments i.e. 5% of your outstanding loan value per year is common across banks but there may be costs if you want to make extra repayments above that or repay the loan early.

Floating Rate Loans

Your interest rate can change at any time as market rates change, meaning your repayments may increase or decrease. The main advantage is flexibility, as you can usually make extra repayments or repay the loan in full without break fees.

Split Loans

A split loan combines fixed and floating portions. This allows you to enjoy the certainty of fixed repayments on part of your mortgage while retaining the flexibility to make extra repayments on the floating portion.

Offset Mortgages

An offset mortgage links your home loan to one or more savings or transaction accounts. Instead of earning interest on your savings, the balance in those accounts reduces the amount of your mortgage that interest is charged on.

For example, if you have a $600,000 mortgage and $40,000 in linked savings accounts, you'll only pay interest on $560,000 while that money remains in the accounts.

This can be a great option for borrowers who regularly maintain healthy savings balances while still wanting access to their money.

Note, you don't earn interest on any of your designated offset accounts.

Revolving Credit Mortgages

A revolving credit mortgage works like a large overdraft secured against your home. Your income is paid into the account and any money sitting in the account immediately reduces the amount of interest you pay.

You can withdraw funds whenever you need them, making it a flexible option for people who are disciplined with their spending and expect to make extra repayments.

Because you have easy access to the available funds, this type of mortgage requires good budgeting habits to ensure you continue making progress paying down the loan.

Offset/Revolving Credit Mortgage Comment

Offset and revolving credit mortgages can help reduce the amount of interest you pay over the life of your loan. While they sound similar, they work in different ways and suit different types of borrowers. A mortgage adviser can explain the differences and help you decide whether either option is appropriate for your situation.

Key Insights

The "right" mortgage structure will depend on several factors, including:

Your income stability and cash flow.
Your future plans, such as renovating, upgrading, investing, or selling.
Your comfort level with interest rate changes.
Whether you expect to make extra repayments in the future.

There is no one-size-fits-all solution. A mortgage structure that works well for one person may not be suitable for another. This is an area where good advice can make a significant difference over the life of your loan.

9. Making an Offer / Going Unconditional and Settling

Once you've found a property you'd like to purchase, you'll make an offer to the seller by signing a Sale and Purchase Agreement. The seller may accept your offer, reject it, or negotiate different terms before both parties reach an agreement.

The purchase process can then be broken into three key stages.

9.1. Signing the Sale and Purchase Agreement (Conditional)

In many cases, the Sale and Purchase Agreement will include conditions that must be satisfied before the agreement becomes unconditional.

Common conditions include:

Finance approval
Building report
Registered Valuation
LIM report
EQC and insurance checks

These conditions give you time to complete your due diligence and confirm that you are comfortable proceeding with the purchase.

Typical timeframe: Around 10 working days is common for finance approval and other due diligence. If you intend to use KiwiSaver towards your deposit, allow at least 15 working days to ensure your provider has sufficient time to process the withdrawal. The exact timeframes are negotiated between the buyer and seller and recorded in the Sale and Purchase Agreement.

9.2. Going Unconditional

Once all conditions have been satisfied or waived, the agreement becomes unconditional. At this point, you are legally committed to purchasing the property, and the seller is legally committed to selling it to you.

From this point onwards, there are no remaining conditions allowing either party to withdraw from the agreement without legal consequences.

Typical timeframe: Allow at least 10 working days between going unconditional and settlement. This gives your lender and solicitor time to prepare the mortgage documentation, arrange the transfer of funds, complete the legal ownership transfer and finalise all settlement requirements.

During this period, you will usually need to:

Confirm your final loan structure and interest rates with your mortgage adviser.
Sign your loan documentation with your solicitor.
Put house insurance in place and provide proof of insurance to your solicitor and lender. The bank will not release the mortgage funds until insurance has been confirmed.
Arrange a pre-settlement inspection of the property, usually through the real estate agent, to confirm the property is in the agreed condition before settlement.

9.3. Settlement Day

Settlement day is the day ownership of the property transfers to you.

On settlement day:

Your lender releases the mortgage funds.
Your solicitor transfers the purchase funds to the seller's solicitor.
Ownership is transferred into your name.
You receive the keys to your new home.

Key Insight

Many buyers think settlement day is the most important milestone. In reality, the biggest commitment occurs when the agreement goes unconditional, because this is the point at which both the buyer and seller become legally committed to completing the transaction.

10. Wrapping It All Together

As you've seen throughout this guide, buying your first home is a journey with a number of different steps and professionals involved. It can sometimes feel overwhelming, but guiding clients through this process is exactly what a mortgage adviser does.

That's also where our Property Purchase Tracker can help. It provides a simple step-by-step checklist, so you'll always know where you are in the buying process, what's coming next, and who is responsible for each stage. Every one of our clients receives a copy, giving them confidence that they know exactly what happens next.

Ready to take the next step?

If you’re thinking about buying your first home, I’d be happy to talk through your situation and help you understand your next steps.

There's no charge and no obligation to have a chat. We’ll discuss your deposit, income and plans, and determine how I may be able to help.

Book an initial conversation

Or contact me directly:

Mike Fraher, Financial Adviser
Phone: 021 954 956
Email: mike@clearpathadvisory.co.nz

I look forward to helping you take the first step towards owning your own home.

Mortgage Broker or a Bank?

Sun, 27 Oct 2024 11:46:04 GMT

Mortgage Broker Versus Salesperson at a Bank

There's a big difference in the way the two operate, what they can offer you and how they are paid. You should know the differences in their services when you are getting or renewing your mortgage.

What does a Mortgage Broker Do?

A mortgage broker acts as an intermediary between the borrower and the bank or lender offering funds. A mortgage advisers job is to do the following.

Understand your financial position and your goals for the future.
Hunt the market for the best mortgage option for you.
Provide expertise to clients during the home purchase.
Offer advice on mortgage products and how they fit your circumstances i.e. whether to fix or float or use a combination.
Tell you what information you need to supply and submit the mortgage application for you.

Brokers in New Zealand must be licensed and registered with the Financial Markets Authority (FMA). They must also complete educational requirements to ensure the have the required product knowledge to advise members of the public.

How are mortgage brokers paid?

Advisers are usually paid a percentage commission based on the amount of the home loan. This payment does not effect the interest rate you are charged.

What does a Bank Salesperson Do?

A sales person at a bank has the same role as a broker with one exception. They do not "Hunt the market for the best mortgage option for you". A bank sales person can only offer the products available at their own bank. They seek value for you by knowing you personally and offering the suite of products available from their institution. For example, you may have your mortgage, a savings account, a credit card and even KiwiSaver all with the one bank.

How Do I Pick Which One to Use?

The key here is to first understand that if you are borrowing for buy a home, you are the customer and you have bargaining power. There are often cash incentives for going with different banks and it's worth shopping around to see who has the best offer. There's no harm done in trying both. Any financial adviser should advise you up front how they earn their fees, if they don't, ask them at the beginning. Here's some key tips to help make a decision.

Regardless of Bank or Broker - having a good relationship with your financial adviser is really important. If you're not comfortable with an adviser, try someone else.
They should understand your financial position and want to help grow your wealth.
It's their job to work through the pros and cons with you and explain why a product is or isn't a match to your goals.
If someone has arranged a mortgage for you in the past and you are coming up for a fixed rate renewal, they should be in contact with you asking if you want any help ... if they haven't contacted you then it's time to look around.
It does no harm to try different options and see which one fits you best.

Question: have you ever

heard from the person who arranged your mortgage again?

Mortgage Broker Versus Bank Checklist

Shop around and find a good personal fit.
Don't be afraid to ask questions, it's their job to help you.
You should receive personal, tailored, professional service that helps you get into a home or an investment.

Your Mortgage Checklist

Sun, 27 Oct 2024 11:46:04 GMT

Mortgage Checklist

It's stressful buying a home, whether it's your first time or last. Here's a list of things you can work through to make sure you're prepared. Remember a financial adviser can help you work through and submit the application for you.

What's your home loan budget?

We have an article here that covers tips and information on getting a deposit. We suggest savings tips and also outline help you can get via KiwiSaver and the First Home Loan scheme available from some banks. We also have links to budget apps that will keep you honest when assessing how much you can afford.

Find your home

Are you going to build or buy an existing house. You'll need to weigh up the time versus getting exactly what you want. The best way is to start looking and you don't have to leave the house. Here's a few online resources to use.

homes.co.nz - search by map interface

trademe.co.nz - not just your second hand good, they also have a property section

realestate.co.nz - official website of the Real Estate Institute of NZ

oneroof.co.nz - website version of the print version in the NZ Herald

Decide on a bank or broker

We address this decision in this article , the key thing is that you find the right person for you. This decision is supposed to make things easier because you've found someone you can trust who will help by doing a lot of the work for you. Regardless of who you choose you will need to know the following to kick off the process.

What deposit I have and where it is i.e. KiwiSaver, savings account, gift from parents etc.
What is my income and how long have I been employed there.
What are my debts.

What kind of mortgage is right for you?

Do you want to split your mortgage into part fixed, part floating. There's reasons to do that based on your expected future income. It may also be that you are suited to an Offset Mortgage or a Revolving Credit Mortgage. The links take you to our articles which explain the ins and outs but that's also part of your financial advisers job - to advise you on the best structure for your mortgage.

Mortgage pre-approval

If you know your budget and want to get organised, contacting a financial adviser and getting pre-approved for a specific loan amount means you can move quickly when you find the right property. You don't have to do this but it can speed things up once you've selected a property.

The paperwork

Here's some things you'll need to work through.

Building inspection and valuation

You can read up on this government website concerning advice about buying a house. But the bottom line is "A pre-purchase building inspection is advisable for all properties, but essential for homes that may be at risk of leaking or have been damaged by a natural disaster."

Land Information Memorandum (LIM)

This is a report that contains the summary of information about a property from council records. It's essential to get an up to date LIM report, it shows things like zoning, rates owing, land features etc. Here's a link to the Auckland Council's website explaining what's in a LIM.

Getting a lawyer to complete the ownership transfer

You will need a lawyer or conveyancer to complete property transaction. Having a lawyer will ensure you cover any extra issues that may occur.

Good things to know

Good bank account conduct

Good bank account conduct for the previous 3 months is needed to get a loan. Make sure you have no dishonours, this is simply showing the bank you can manage your expenses.

Pay off Debts

Banks will consider all debt like buy now pay later, credit cards and personal loans. If you can pay these off, this can improve your affordability calculations.

What is a Revolving Credit Mortgage

Sat, 26 Oct 2024 07:31:43 GMT

Understanding Revolving Credit Mortgages

A revolving credit mortgage is one big account that all transactions pass through i.e. your income, savings, expense payments and mortgage payments are all handled from one account. Think of one big overdraft account for everything to go into. You only pay interest on the balance of the account each day when interest is calculated. The idea being that the positive balances in the account reduce the amount of principal you pay interest on.

How does a revolving credit mortgage work?

Generally a revolving credit mortgage is based on a floating interest rate and does not have a fixed term. In this case the credit is revolving as you can borrow and repay the funds over and over. The account offers a lot of flexibility as you can make lump sum payments i.e. if you got a bonus you may choose to put that whole sum into your revolving credit account and hence immediately pay that amount off your mortgage, with no penalty for making an extra payment. Conversely, if you wanted to withdraw a $4,000 to buy a cheap car you have immediate access to those funds up to your credit limit.

Note: A revolving credit mortgage does not have set repayment amounts on a set date. You can make payments at any time for as much as you like, conversely you can withdraw funds up to your limit whenever you like. You pay interest on your outstanding balance, which is calculated daily. Interest is deducted usually fortnightly or monthly from your revolving credit account, meaning you must have sufficient credit available in your account so you don't exceed your limit.

Tip: Using your credit card for all expenses and paying it off in full each month is a great way to keep your revolving credit account balance down minimise your interest payments.

What are the Pros and Cons?

Pros

Ability to reduce your mortgage expense by lowering your principal.
Ability to redraw credit multiple times.
Not charged for extra repayments
May suit irregular income earners

Cons

With funds easily available you may be tempted to draw down when you can't afford it
The savings accounts money you put into the revolving credit account are not earning interest.
You cannot lock in a fixed rate as revolving credit accounts are usually based on floating rates.
It can be difficult to track where you are at i.e. there is not a separate savings account that you can watch grow, everything is all together in one big account.

Who should use a revolving credit mortgage?

This type of account is best suited to people who have good discipline with their money management. Funds are easily available for purchases up to your credit limit, so you'd need to be careful opting for this account if money tends to burn a whole in your pocket. It can be confusing trying to understand where you mortgage is at i.e. how much progress you've made paying it off. Funds come in and out constantly which makes benchmarking difficult.

A similar product to a revolving credit account is an offset mortgage, it offers similar advantages but with less financial management required. You can read about offset mortgages here .

How To Save a Mortgage Deposit

Fri, 25 Oct 2024 03:28:21 GMT

In New Zealand you generally need a 20% deposit when buying a home, although banks do lend in some circumstances to those with less than that amount. With the year by year increase in property values 20% can seem a little out of reach. Read on as there are lots of things you can do, in this article we cover the following topics.

Tips for Saving your deposit
Using KiwiSaver for your deposit
First Home Loan - 5% deposit

How Do I Save Up For a Mortgage Deposit

Of course you need to be disciplined and keep putting funds aside until you reach your deposit amount goal, we want to help get you there. There are plenty of tips and tools that can make that journey easier and hopefully faster.

Set yourself a savings goal

You need to work out what's possible so you can set yourself a realistic target and timeline to achieve it. The sorted website has some excellent budgeting tools, particularly this Budget Planner where you can enter everything in and save under your profile if you choose.

Look at your income

Can you do something short to medium term to increase your income?

Do you have a spare room to take a boarder?
Can you take on extra work to get over the line?
Have a think about your skills, could you provide tutoring on a topic?
Would you consider being an Uber driver?
If you have a part of a deposit, make sure you're earning the best interest rate .

Be strict with your expenses

It's surprising when you do a review of your expenses how much you can lower your outgoing costs, for example.

Shop at Pak'nSave instead of New World and start bulk buying.
For regular expenses like petrol make sure you're on reward programs.
Tell the kids to cut down shower times.
Review your utility bills and switch if a company is offering you a saving.
There's plenty of competition now in the mobile phone market , make certain you have the cheapest plan for your use.
Plant your own vegetables - healthy and cheap!

Can I Use My KiwiSaver When I Buy a Home?

Sure can, if it's for your first home! This government website explains all the details, a summary below.

Eligibility to use KiwiSaver for your first home

Must have been a member of KiwiSaver for at least 3 years.
You intend to live in the property, KiwiSaver funds cannot be used for an investment property.
Must not have owned a home or land before (there is a second chance opportunity for those in the same position as first home buyers, check with Kainga Ora - Homes and Communities).
The home or land must be in New Zealand.

You can withdraw

Your contributions
Your employer's contributions
The government contribution
Interest you have earned
Fee subsidies (if you got these).

Note: you must leave $1,000 in your account and cannot withdraw funds transferred from Australian Superannuation Schemes.

What is a First Home Loan?

Some banks and other lenders have joined a scheme where they will issue a loan to borrowers with only 5% deposit. These loans are underwritten by the government via Kainga Ora - Homes and Communities . The end result - it's easier to get into your first home.

To be Eligible for a First Home Loan, you must.

Have the 5% deposit and be purchasing a home as your primary place of residence.
Be a New Zealand citizen or permanent resident.
Be a first time buyer or be in a position of a first time buyer.
Have a before tax income from the last 12 months of
$95,000 or less for an individual buyer without dependants; or
$150,000 or less for an individual buyer with one or more dependants; or
$150,000 or less (combined) for two or more buyers, regardless of the number of dependants

You will still need to meet your banks lending criteria but the key is that you might be able to get into a home sooner than it takes to build up the full 20%.

What is an Offset Mortgage

Wed, 23 Oct 2024 22:44:52 GMT

How do Offset Mortgages Work?

An offset mortgage account allows you to select a number of accounts where you hold a positive balance to be offset against your mortgage balance. Offset mortgages have a floating or variable interest rate, which is usually higher than fixed interest rates. Typical accounts that you would use to offset your mortgage balance would be savings accounts or everyday accounts such as accounts where you move money to pay your bills with.

You only pay interest on the balance of your mortgage account minus the balance of your offset accounts. However you do not earn interest on the accounts where you have a positive balance and have designated to be offset accounts. You will have a minimum repayment amount which you'll pay on your payment date. Typically the banks providing this account will allow you to make extra payments on your mortgage without paying a penalty.

If you use an offset mortgage account properly it will decrease your interest paid over the life of your mortgage. The result being that you end up paying your mortgage off faster and pay back less interest over the course of your loan.

An Offset Mortgage Example

Referring to the image above, imagine you have positive balances across some accounts that totals $15,000. If you have an offset mortgage, when the bank calculates the interest you owe it will subtract $15,000 from the balance of your mortgage $250,000 so you end up being charged interest on $235,000 instead of $250,000.

How Much Does an Offset Mortgage Save Me?

Calculating potential savings is complex as it involves:

A day by day comparison of what you would pay under a fixed rate versus payments under floating rates applied against your mortgage balance offset by accounts whose balances vary day by day.

However that's exactly what your financial adviser is there to help you with. A good financial adviser should be able to work through this with you! Here's what you'll work through and understand to see if this type of account makes sense for you.

There is a trade off in that you are not earning interest on your savings but instead are reducing it on your mortgage payments.
The interest rates in New Zealand for floating rates are usually higher than fixed rates.
So you need to have enough positive balance to offset that higher interest you pay on a floating rate.

It's complex but we have tools to help analyse this type of decision to see if it's correct for you!

Offset Mortgage Pros and Cons

Talk to us to assess whether an offset account is right for you

Refix, Refinance or Restructure

Mon, 30 Sep 2024 22:44:53 GMT

Refix, Refinance or Restructure

These terms are all common place when your dealing with home finance. You should understand what each one is when it comes to making decisions about what is likely to be your biggest asset.

What is a Mortgage Refix

Refixing is when you lock in a new interest rate for a set period of time once your current fixed interest rate period has expired. An example is some who had agreed on a fixed rate for 2 years with their bank. After 2 years is up they decide to fix again for 2 more years at a new rate. That's a refix.

If you want to explore the effect a change in rates will have on what you pay each month, try different rates in our Calculators page.

What is a Mortgage Restructure?

A mortgage restructure is changing the way your mortgage is structured or in simpler language the way it works, there are many options than just just picking a fixed time period to pay off your loan and fixing a rate. An example is someone who is coming to the end of their fixed 2 year period commitment and wants to explore other ways to more effectively pay off their home loan. Some examples of what you might consider as options for a restructure.

Splitting your mortgage into a fixed and floating component

Why: You have surety concerning the fixed payments i.e. exactly how much you will pay over a set period of time. With the floating portion you have the flexibility to make lump sum payments without getting penalised. This gives you great flexibility if you happen to come into some money via a bonus or gift and want to reduce your mortgage duration.

Setting up an Offset Mortgage

Why: An offset mortgage allows you to designate a set number of accounts that hold a positive balance to be used to offset the amount of interest you pay on your mortgage. For example if you have a mortgage of $250,000 but you have $15,000 in the accounts you've designated as offset accounts you will only pay mortgage interest on $235,000 instead of $250,000. You can learn more about Offset Mortgages in our article here .

Setting up a Revolving Credit Mortgage

Why: A revolving credit mortgage is like a big overdraft account with all income and payments being managed from one account. It provides huge flexibility when managing your funds but also requires good discipline as you can redraw up to your limit. You really need to understand this product before committing to it, if you'd like to understand more about how they work you can read our article here .

What is a Mortgage Refinance?

A mortgage refinance is when you move your home loan from one bank to another i.e. you may feel you are not getting the service you require or another bank may have a mortgage product like an offset account that you want to setup. What actually happens in this instance is that you pay off your home loan in full and move to a new bank.

You should be aware that when you take out a home loan with a bank, you are their customer. Over the course of your 25 or 30 year term most people end up paying the value of what they borrowed twice i.e. if you take out a $250,000 mortgage, over 30 years you end up paying roughly $500,000. The point being, you are a really great customer and the bank should look after you. If they don't you should look around to assess options.

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First Home Buyers Guide

First Home Buyers Guide

What you'll find in this guide!

1. About this guide

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Key Insights

2. How Much Can I Borrow?

Key Insights

Want to know what you could borrow?

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3. How Much Deposit Do I Need?

20% Deposit

10% Deposit

5% Deposit

Key Insights

4. Kāinga Ora First Home Loan - 5% Deposit

Key eligibility requirements include

5. Can I Use My KiwiSaver For My Deposit?

Key Insights

6. Getting Pre-Approval

Benefits of getting pre-approval

Thinking about getting pre-approved?

7. What are the Costs When Buying a Home

Key Insight

8. Choosing the Right Type of Mortgage

Types of Mortgages

Fixed Rate Loans

Floating Rate Loans

Split Loans

Offset Mortgages

Revolving Credit Mortgages

Offset/Revolving Credit Mortgage Comment

Key Insights

9. Making an Offer / Going Unconditional and Settling

9.1. Signing the Sale and Purchase Agreement (Conditional)

9.2. Going Unconditional

9.3. Settlement Day

Key Insight

10. Wrapping It All Together

Mortgage Broker or a Bank?

Mortgage Broker Versus Salesperson at a Bank

What does a Mortgage Broker Do?

How are mortgage brokers paid?

What does a Bank Salesperson Do?

How Do I Pick Which One to Use?

Question: have you ever

heard from the person who arranged your mortgage again?

﻿ Mortgage Broker Versus Bank Checklist

Your Mortgage Checklist

Mortgage Checklist

What's your home loan budget?

Find your home

Decide on a bank or broker

What kind of mortgage is right for you?

Mortgage pre-approval

The paperwork

Building inspection and valuation

Land Information Memorandum (LIM)

Getting a lawyer to complete the ownership transfer

Good things to know

Good bank account conduct

Pay off Debts

What is a Revolving Credit Mortgage

Understanding Revolving Credit Mortgages

How does a revolving credit mortgage work?

What are the Pros and Cons?

Who should use a revolving credit mortgage?

How To Save a Mortgage Deposit

How Do I Save Up For a Mortgage Deposit

Set yourself a savings goal

Look at your income

Be strict with your expenses

Can I Use My KiwiSaver When I Buy a Home?

Eligibility to use KiwiSaver for your first home

You can withdraw

What is a First Home Loan?

To be Eligible for a First Home Loan, you must.

What is an Offset Mortgage

How do Offset Mortgages Work?

Mortgage Broker Versus Bank Checklist