Home Loans

What is a home loan?

A mortgage comes with fees and charges but the main cost is the interest charges. The loan will come with an interest rate that determines how much interest you will be charged each month. The interest rate is generally the most competitive feature across mortgage products and even a small change in rates could change the cost by thousands of dollars per year. 

How do I compare a home loan?

When searching for the right mortgage, you need to be aware of all the features plus the bells and whistles available on some products. Once you know what features you need, you can compare aspects to get an understanding of the overall cost.  

Mortgage features to consider when making a comparison

• Offset account. An offset account works like an everyday savings account and is attached to the mortgage. Any money sitting inside the offset account reduces the loan amount so you pay less interest. For example, if your mortgage is $150,000 and you have $50,000 in an offset account, you will only be charged interest on $100,000 while the $50,000 in the offset account is directly offsetting the loan amount. 
• Redraw facility. You are able to withdraw any extra money you’ve accumulated in your loan if you have a redraw facility. If you are able to make additional repayments on your loan, you will usually have the option to redraw the money to use as you please. 
• Additional repayments. If you are looking to have the option of repaying your mortgage earlier than the term of the loan, you will need to make sure your mortgage offers the ability to make additional repayments. It is sometimes not an option with fixed rate loans so be sure to double check.  
• Fixed vs Variable interest rates. Choosing between fixed and variable can be tricky as they both have their pros and cons. Fixed interest rates are locked in for a set period which offers peace of mind and makes budgeting easy as you know they won’t suddenly rise. Variable rates provide the option to make additional repayments and enjoy any rate cuts but you'll need to increase your repayments if the rates rise.  
• Rate splitting. If you can’t decide between fixed and variable, you can split the mortgage into fixed and variable portions to take advantage of both options. With the rates split, you can make extra repayments and take advantage of rate cuts with the variable portion and enjoy the stability the fixed portion offers. 
• Comparison rate. This rate is calculated on a hypothetical mortgage amount to give an idea of what one mortgage looks like pricewise compared to another product. It is calculated by taking the interest rate, plus all fees and charges into consideration.  
• Loan-to-Value Ratio (LVR).  LVR is the ratio of a loan to the value of a property purchased. It is the mortgage amount as a percentage of the total appraised value of the property. For example a maximum LVR of 80% means the lender will only offer up to 80% of what the house is worth, meaning you’ll need to come up with the other 20% as a deposit. Some loans go all the way to 95% LVR but usually any deposit under 20% of the property value will require you to pay lenders mortgage insurance (LMI) to protect the lender in case you default on the loan. 

When comparing mortgages, be sure to consider interest rates, loan terms, costs and features when deciding what is best for you. 

Take a look at some of the great home loans available in New Zealand currently:

Company - Rate as at 6/7/2020 - Max LVR

• ASB - Variable - 4.45% - 95%
• BNZ - Standard Variable - 4.55% - 95%
• Kiwi Bank - Offset - 3.40% - 95%
• Westpac - Choices Floating - 4.59% - 95%