Mortgage Documents

Signing Your Mortgage

Once you have confirmed your loan structure with your bank or lender, they will prepare the mortgage documents which are then sent to your solicitor for signing. You will need to make an appointment with your solicitor to complete this.


Types of Mortgages


Table loan

This type of loan is the most popular in New Zealand. How it works -each repayment includes a combination of interest and principal. At first, your repayments will comprise mostly of interest but as the amount you still owe begins to decrease, your regular repayment will include less interest and repay more of the principal (the amount you borrowed). Most of your later mortgage repayments go towards paying back the principal.


Straight Line Loan

This type of loan is seldom used in New Zealand. How it works – the amount of principal you are borrowing is divided into equal repayments over the term of the loan, and then interest is applied to each of these repayments. Each repayment includes the same amount of principal, so as the total principal reduces, so does the interest charged. This way the repayments reduce a little each time.


Interest Only

With interest only loans you are only paying the interest cost but no principal, so the amount that you borrow does not reduce. Interest only loans are usually only available for those who have more than 20% equity in their property and are often limited to a maximum period of 5 years.


Flexible Facility

A flexi facility is like having a large overdraft facility and combines your daily transactions and home loan into one account. This way when your income is paid in, it immediately reduces your home loan balance saving you on interest. Some flexi facilities have reducing limits which help you repay the principal. If you have a non-reducing limit you need to be very disciplined in making principal repayments to the account to reduce the amount of the loan.

Often people with flexi facilities will use their credit card for all their day to day expenses and then pay the full balance owing before due date. This provides some interest free credit and leaves the dollars in your account reducing your interest costs. If you are going to use your credit card in this way – we recommend setting up a direct debit to pay your credit card – that way you’ll never miss the due date and be up for hefty interest rate fees. We also recommend that so long as you always pay your credit card before due date that you look for a card that offer maximum rewards – you may like to save up air points for a mid winter break!


Offset Loans

Some banks can offer offset loans. Offset loans offset the amount of your loan by the value of funds held by you in other accounts thereby saving you in interest costs. Offset loans are available on floating rates only.


 

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