Buying a Home

Home loans for first home buyers

Buying a Home

Home loans for first home buyers

Not sure about what sort of home loan is right for you? Getting this right the first time can make a massive difference to how quickly you pay it off.

There are upsides and downsides to every kind of mortgage, so with our guidance, you can make a much more informed decision around the solution that best fits your current situation and future plans.

Consider the mortgage types below and get in touch with an Adviser to learn more about them and which could work for you.

Fixed interest rate home loans

Fixed rate home loans see you lock in the interest rate you will pay for a defined term. Having a fixed rate home loan gives you the certainty of knowing what your repayments will be and protects you from fluctuating interest rates. The flipside is you that you won’t benefit from lower interest rates if they drop during your fixed period.

  • Upsides
  • Depending on the lender, you may be able to increase your payments by a certain amount, resulting in your loan being paid much quicker
  • You can budget and enjoy peace of mind knowing exactly how much your repayments will be during the period
  • Protection from rising interest rates
  • Downsides
  • Interest rates may drop below your fixed rate
  • Paying your loan off faster with lump sum repayments may not be allowed without penalty
  • A penalty or ‘break fee’ may be charged by the lender if you sell your home or come into some money and pay off part or all of your loan within the fixed term

Floating rate home loans

Also known as a ‘variable rate’ mortgage, floating rate home loans see your repayments potentially going up or down as your lender raises or lowers your interest rate in reaction to market fluctuations. The changes to interest rates are influenced by a number of things, including the Official Cash Rate (OCR) as set by the Reserve Bank of New Zealand.

  • Upsides
  • Your repayments go down if interest rates fall
  • More flexibility to make additional payments to pay off your loan faster
  • Depending upon the type of floating home loan, you may be able to draw down on the unused limit to use as you wish (e.g., holiday, car purchase, consolidate more expensive debt etc.)
  • Downsides
  • If interest rates rise your repayments may rise too, leaving less money in your budget
  • Floating interest rates can often be higher than fixed rates

Fixed and floating combination home loans

A combination home loan lets you leverage the best parts of fixed rate and floating rate home loans. Some of your loan can be fixed at a set interest rate, while the rest is subject to floating rates. This gives you both the ability to make extra payments on the floating rate portion of your loan, and the security of having a fixed repayment on the rest. How much you put into each loan is determined by what’s more important to you — extra payments with more risk, or more certainty at the cost of flexibility.

  • Upsides
  • You get the benefits of both fixed and floating home loans
  • More flexibility to tailor the make-up of your loan
  • Downsides
  • You’ll be stuck paying a higher rate on the fixed portion of your loan if interest rates drop

Revolving credit home loans

Revolving credit home loans are similar to the overdraft on an everyday account. Your earnings are deposited straight into the home loan account, bills are paid out from here and you can make withdrawals up to your credit limit at any time. The more money you keep in the account at any given time, the lower your loan is and the less interest you pay because your lender will calculate interest daily.

  • Upsides
  • You can make lump sum payments
  • You can become mortgage-free faster if you’re well organised
  • Suitable for those with an irregular income
  • Depositing surplus money into loan account will save you interest
  • Putting funds in this account avoids savings account interest tax
  • Downsides
  • It’s ever so tempting to use revolving credit home loans like a credit card for all sorts of purchases, taking you longer to pay off your mortgage
  • Discipline is a must

Interest-only home loans

A combination home loan lets you leverage the best parts of fixed rate and floating rate home loans. Some of your loan can be fixed at a set interest rate, while the rest is subject to floating rates. This gives you both the ability to make extra payments on the floating rate portion of your loan, and the security of having a fixed repayment on the rest. How much you put into each loan is determined by what’s more important to you — extra payments with more risk, or more certainty at the cost of flexibility.

  • Upsides
  • More money is available for other things like renovations
  • Can be a smart property investment move
  • You can start your loan off as interest-only and then remortgage to start paying principle later
  • Downsides
  • It will cost you more in the long run because the loan is not actually being repaid during the interest-only period
  • If the property market rates drop you may end up owing more than your property is worth
First Home Buyer Success Stories

Simon and Katie buy their first home, and peace of mind

Location:
Woodend, Canterbury
Situation:
Buying first home and finding life insurance policy
Adviser:
Katy Pheloung and Tony Mounce
We were looking to buy our first home and get life insurance in the process. We had tried to talk to our bank but found them difficult to deal with.

We chose Tony Mounce Mortgages & Insurance as our advisers because everyone we talked to was easy to deal with and talked us through every step of the process without any pressure.

We spoke to them about our options and what it would take for us to get a mortgage, then went back to them a year later when we were in a position to go ahead.

A positive outcome without the stress
The outcome was perfect — we got a mortgage on the terms we wanted and have been able to build a beautiful home we designed ourselves.

The team stayed in contact with us every step of the way and made the process as smooth as it could be. We didn’t have to spend hours on the phone with the bank arranging anything or causing needless stress.

Customers for life
Our experience was awesome, and we’ll happily go to them again for any mortgage or insurance needs in future. They made every step of the process so easy, and everyone has been lovely and amazing to deal with.

You really feel like the team go above and beyond to get everything right for you. - Simon and Katie Cartwright

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