Is your mortgage structure working with you to achieve your goals? For lots of us, our home loan is one of the most important financial commitments in our lives.

Have you got the structure of yours right?

Mortgage structure

There are a few common repayment structures used by home loan borrowers in New Zealand.

Table mortgage: A table mortgage is a loan where the repayments stay the same for the term, except when interest rates change. At the start of the borrowing period, most of your payment goes towards interest, but over time the amount of principal you’re paying within your payment increases, and the interest component decreases.

Revolving credit: Revolving credit works a bit like a big overdraft. You might section part of your home loan off to create a revolving credit account. Then, each payday, your income gets credited to that account. During the month, you put most of your purchases on your credit card, and on or before the due date, you clear the card balance with the funds available in your revolving credit facility. This can help you pay off your loan more quickly in a couple of ways – the first is that you aim to have a bit of a surplus each month to reduce the total that you owe on the revolving credit limit. The second is that, while your income is sitting in your account through the month, it reduces the amount of interest that is payable on your revolving credit facility. This can work well but does require discipline to stay on track.

Offset: Some lenders offer an offset option in which money in your savings account, or the account of other family members, is offset against the money you owe on your home loan, reducing your interest bill. This can be a handy tool but does mean you give up interest on the savings.

What’s right for you?

The right structure for you will depend on your personal circumstances.

Revolving credit can be effective if you’re the type of person who finds it easy to stick to a budget and you’re motivated by bringing your balance down little by little. Some people have such success with this model that they can keep portioning off sections of their loan, paying them off, then carving off another bit.

You might also find a revolving credit is a handy tool if you have fluctuating income or receive money in lump sums. Some people choose to have their revolving credit portion virtually paid off, or close to it, but leave the funds available in case they need to access them in the future, perhaps for an investment opportunity or business expenses.

A table structure could be appropriate if you want financial certainty about how much you will be paying each month and like knowing that your loan is gradually being repaid, payment by payment. It can also be appropriate for part of your home loan, while you use another type of structure on the rest.

An offset can make a lot of sense if you have savings that you need to keep separate. Not all lenders offer this as an option, but your SHARE or Newpark mortgage adviser can help you determine what might be available to you.

We can help

As mortgage advisers, we can help you find a home loan structure that works for your circumstances and your home loan goals.

The right solution will depend a lot on your individual situation, but our team of expert financial advisers can help you come up with a personalised plan.

Ready to get going?

If you’d like to talk about the structure of your home loan, whether it’s an existing loan or a new one, get in touch with the SHARE or Newpark team today. We’re here to help every step of the way.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.