Which Type of mortgage should you get?

Choosing the right mortgage isn’t just about finding the lowest rate — it’s about matching your loan to your lifestyle, income, and long-term goals. At Best Mortgages, we help home buyers and investors across Tauranga and the Bay of Plenty build the right loan structure from the start, so repayments stay manageable even when the market changes.

Fixed-Rate Mortgages – Certainty and Stability

A fixed-rate mortgage locks your interest rate for a set term, usually between six months and five years. Many Tauranga buyers prefer this option because it gives peace of mind: your repayments stay the same every fortnight, which makes budgeting easy and shields you from sudden rate rises. Once the fixed term ends, you can refix at the current market rate or switch to a floating portion. It’s worth knowing that fixed loans limit lump-sum repayments — most lenders allow only small extra payments each year. Breaking a fixed term early (for example, selling before the term ends) can trigger a break fee, which compensates the lender for lost interest. Some banks now offer capped-rate loans — you get the benefit if rates fall, but your rate can’t rise above a preset ceiling.

Floating-Rate (Variable) Mortgages – Flexibility When You Need It

A floating or variable-rate loan moves with the market and the Official Cash Rate (OCR). When the Reserve Bank adjusts the OCR, lenders usually change their floating rates soon after. The advantage? You can make extra repayments, pay off large chunks at any time, or redraw funds for renovations or debt consolidation without penalty. The downside is that floating rates are generally higher than fixed ones, and they can rise suddenly. Many clients choose a split structure — for example, 80% fixed for certainty and 20% floating for flexibility. That balance lets you chip away at the principal faster while keeping most of your repayments predictable.

Table Loans – Even Repayments, Easy Budgeting

A table loan is the most common structure in New Zealand. Your repayments stay roughly the same over the life of the loan (assuming the interest rate doesn’t change). At first, most of your payment covers interest; over time, more goes toward the principal. This steady pattern makes budgeting simple and keeps cash-flow smooth — ideal for first-home buyers or anyone wanting consistency.

Reducing Loans – Higher Start, Faster Finish

A reducing loan repays the same amount of principal with each instalment. Because interest is calculated on the remaining balance, your repayments start higher and drop gradually as the balance shrinks. Overall, you pay less interest than with a table loan — but you’ll need to handle the larger initial payments. This setup suits borrowers on higher or seasonal incomes, such as contractors around Mount Maunganui or self-employed professionals planning to scale back hours later.

Revolving Credit – Smart for the Financially Disciplined

A revolving credit loan works like a large overdraft. Your income goes into the account, bills come out, and the remaining balance reduces your interest cost because interest is charged daily. Used well, it can cut years off your mortgage. Used poorly, it can keep you in debt indefinitely — discipline is key. For clients comfortable tracking spending, this setup can be powerful. For others, a small revolving portion combined with a fixed table loan often works better.

Interest-Only Loans – Short-Term Breathing Room

With an interest-only loan, you pay just the interest for a set period — usually one to five years — before switching to principal + interest. It’s a way to keep payments lower while you free up cash for renovations, new business investment, or property upgrades. Because you’re not reducing the principal, it costs more long term — but it can be useful for investors managing multiple properties or for first-home buyers expecting income to rise soon.

Combining Loan Types for Your Strategy

Most Tauranga homeowners now use mixed structures — splitting the loan across different terms or rate types. For instance:

• Half fixed for two years at a competitive rate.
• A quarter fixed short-term to capture future rate drops.
• The remainder floating or revolving for flexibility.

At Best Mortgages, we model multiple structures using your real numbers — income, expenses, and future goals — so you can see the long-term cost difference before you sign anything.

Local Example – Smart Structure in Action

Recently, a Pyes Pa client with a $700,000 loan wanted stability but also flexibility for extra payments. We split their loan 80% fixed for two years and 20% floating. Within a year, they’d repaid an extra $25,000 — saving more than $10,000 in future interest while keeping predictable fortnightly repayments. Small structural tweaks like that make a big difference over time.

Final Thoughts

There’s no single “best” mortgage — only the best one for you. The right structure depends on your goals, budget, and stage of life. As your local mortgage broker in Tauranga, Best Mortgages compares rates and policies across major banks and trusted non-bank lenders to design a loan that truly fits. If you’re unsure where to start, reach out — we’ll explain your options clearly, run the numbers, and help you make a confident, informed decision.