Managing your home loan in a changing economy

A home loan is usually a long-term arrangement – and it’s important to remember that things can change over that time. Unexpected events, along with rising rates and cost of living increases, can make it harder to meet your repayments. Other times you may be in a better financial position, and can explore options to pay your loan off a bit faster. 

We know many Kiwis are feeling the double impact of higher home loan rates, along with day-to-day expenses creeping up. If you’re experiencing this, or something else about your situation has changed and you’re struggling to meet your repayments, contact your bank as soon as possible.  They can work with you to see if there are ways to help relieve any financial pressure. 

Here are some of the potential options for restructuring a loan that you could consider.

If your circumstances change, it could be timely to review your home loan structure, to see if there’s an option that might work better for you.

We’ve compiled a simple summary of our different home loan options to help you decide. Ready to compare our different home loan types? 

If you’re on a floating interest rate, it’s worth finding out whether a fixed rate option offers a lower interest rate. Switching to a lower interest rate would mean your repayments could be smaller during the fixed rate period.

What you need to know about this option: With fixed interest rate loans, the interest rate only applies for the fixed rate period (anywhere from six months to five years). At the end of the fixed rate period you could choose another fixed rate period or a floating rate, at the interest rates that apply at that time. Our repayments calculator can give you a heads up on what your repayments might be in future, so you can plan ahead.

It’s also important to be aware that fixed rate loans offer less flexibility, for example if you want to increase your repayments, or make a lump sum payment during the fixed rate period, you may be charged fees. There are a couple of ways you can make extra repayments or increase your repayments without being charged a fee. To find out more, read about fixed ANZ Home Loans.

You may be able to extend the term of your loan, so you’d pay it back over a longer period. This means your repayments could be smaller, but you’d make more of them.  You can only extend your loan term, if that loan term will stay under 30 years from your draw down date.    

What you need to know about this option: It’s important to be aware that extending your loan term means you’ll pay more interest in the long term, as you’ll take longer to pay it off. That’s why it’s important to carefully consider whether this is the right option for you.

You may be able to switch to interest-only repayments for a period. This means you’ll only pay the interest on the amount you owe. Your repayments will be smaller during this period because you won’t repay any of the principal. 

What you need to know about this option: It’s important to be aware that switching to interest-only repayments for a time, means your loan amount won’t reduce while you make interest-only repayments. After the interest-only period, you must change your loan back to repayments that reduce the principal, or amount owing on your loan, or repay your loan in full. To keep your loan term the same, your repayments may increase. 

You’ll pay more interest as you aren’t reducing what you owe on your loan for a time, costing you more in the long term. Again, it’s important to carefully consider whether this is the right option for you.

Not everyone will be in a position to repay their home loan faster. But if you’re able to, it makes good financial sense. Not only will you pay less interest overall, you’ll give yourself more flexibility to deal with unexpected events in the future. 

A few small changes to the way you manage your home loan could make a big difference to your bottom line. To find out more, visit Pay off your home loan faster.