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Our expert home loan research team crunches the numbers to rate home loans based on value (price as well as features) to help you compare. Read the home loans methodology.
We rate and review over 60 home loans from 11 lenders which, means you can compare and choose products from both large and challenger brands, established and new.
Our home loan comparison tool allows you to filter your search results so it’s easy to find the right product for you. What’s more, you can click straight through to many of our online lenders, making it easy to apply instantly.
We have all the major banks plus other lenders too
Canstar assesses over 130 mortgages from more 11 lenders across New Zealand, to help you compare home loans and find a home loan to suit your needs.
A home loan or mortgage is a loan from a bank or other financial institution to buy, build, refinance, or renovate a residential property. In New Zealand, a home loan typically has a 25-year or 30-year loan term, is repaid via regular payments and accrues interest. Interest is what a lender charges to let you borrow money, written as a percentage of the home loan amount.
Historically, first home buyers have always been up against it. A housing shortage, low interest rates on savings, immigration, heightened investor activity, over the years, they’ve all caused property prices to rise well above wage inflation and made it very difficult for FHBs to save a deposit.
And although the property market is now cooling, it’s off the back of two years of rampant house price inflation. Plus, to make matters worse, mortgage rates have climbed back from their historic lows, increasing the cost of borrowing.
Canstar recognises there’s a great challenge for first home buyers. So, to provide aspiring home owners with more information, each year we assess and rate the major players in the home loans market to rate their products, service and value for money.
To read more about our latest awards, and to discover why SBS won our 2023 award for Bank of the Year | First Home Buyers click here.
Don’t start looking until you have a location
There are thousands of places to buy out there and the possible choices can become overwhelming. Narrow your search to a specific location, before you start looking. Choose either one suburb, or one suburb and anything within a 5km radius of that area. Having a focus will save you precious time.
Check out the market
Falling in love with a property on the very first weekend you start looking can give you a bad case of buyer’s remorse down the track. So, once you’ve chosen your location, put yourself in a good negotiating position by getting to know the value of the suburb you’re considering.
Get home loan pre-approval
It’s vital to know what your maximum budget is for buying a home. There’s no point looking at places out of your price range. It pays to talk to your financial institution or a mortgage broker about getting a loan pre-approval. You should also work out your upfront costs, such as lender’s mortgage insurance and moving costs.
Check your credit rating
Knowing what’s on your credit rating can help you to explain any transgressions to your prospective lender. You can check your credit rating at Centrix, Credit Simple and Equifax NZ.
Your home loan may be the biggest debt you ever have, so you should ensure you are not paying more than you need to. Compare home loans on Canstar’s database.
Finally, once you have found the home of your dreams, make sure that any documentation you sign is conditional on at least a property inspection, as well as finance.
There are a number of different types of home loans or mortgages available in New Zealand, and the type best-suited to you will depend largely on your personal circumstances and preferences, including why you are taking out a home loan.
Here is an explanation of some of the most common types of home loans you are likely to encounter. A single loan can potentially be a combination of two or three of these, based on its interest rate type, repayment type and loan purpose.
A fixed rate home loan allows a borrower to lock in an interest rate for a particular period of time, typically from one year up to five years. The interest rate that the borrower pays will remain the same for that amount of time, regardless of any rises or falls in the OCR or the lender’s variable rates.
The home loan rate will then normally revert to variable, unless the lender and borrower agree to roll it over for another fixed term.
A variable home loan interest rate can fluctuate according to the lender’s wishes, although banks are often influenced by economic factors such as the official cash rate set by the Reserve Bank of New Zealand.
The rate can go up or down over time, varying your repayments. These loans generally allow for greater flexibility and more features than fixed rate loans, though their interest rates can sometimes be higher as well.
A split home loan refers to when a customer pays a fixed rate on part of their home loan and a variable rate on the rest of it.
If a loan has principal and interest repayments, this means the borrower has to pay back the loan amount alongside the interest throughout the life of the loan.
An alternative to principal and interest, an interest-only home loan is where the borrower only has to pay back the interest on the loan for the first few years, before the loan reverts to principal and interest repayments.
This may suit some borrowers as it can lead to lower repayments in the short-term, but interest-only loans tend to work out more expensive in the long run.
These are home loans where the borrower intends to live in the property rather than renting it out to make money. Interest rates on these mortgages tend to be slightly cheaper than on investor loans.
Owner-occupier loans can be further broken down based on the borrower’s intentions, including whether they are taking out the loan to buy their first home, to buy another home, to build a home on vacant land or to refinance an existing home loan.
These differences can affect the products or rates you can access in some cases. For example, you may be eligible for certain discounts or special offers if you are a first home buyer.
These are loans for property investors who plan to rent or sell the property they’re buying for a profit rather than living in it.
Both owner-occupier and investor home loans can be fixed, variable or split, and may offer principal and interest or interest-only repayments, depending on the specific lender and loan.
Regardless of which type of home loan you choose, it’s important to bear in mind that a home loan is almost always secured against your property, so if you are unable to continue paying the loan, the lender may ultimately be able to evict you from the property and sell it to settle the debt.
If you have another person act as a guarantor for your home loan, that person may also have to pay back the debt if you can’t meet your repayments.
If you’re considering taking out a home loan, you may have some questions you’d like answered. Here are some common queries people search for when researching home loans, complete with links to articles containing further information.
Please note that these are a general explanation of the meaning of terms used in relation to home loans or mortgages.
The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to be part of any loan you may take out.
Generally speaking, the process of obtaining a home loan involves comparing your options, working out how much you can afford to borrow for the property you want to buy, and then applying for a specific home loan – either directly to the lender of your choice or, indirectly, via a mortgage broker.
If the lender approves your application and agrees to lend you the money you requested, it will offer this money to you in the form of a home loan. You will then need to pay back the loan over time, in line with the lender’s terms and conditions.
The amount of money you are able to borrow for a home loan will depend on your personal financial circumstances, as well as the loan provider you choose and its lending policies.
You may be able to borrow more or less money depending on the lender’s assessment of your circumstances, which could include your credit score.
As a general rule of thumb, it’s often worth saving up a deposit of at least 20% of the value of the property you want to buy.
Lenders may also refer to this as a maximum loan-to-value ratio (LVR) of 80%, with your deposit being the other 20%.
The reason this number is important is that borrowers with smaller deposits often have to pay extra for lenders mortgage insurance (LMI), which we explain in more detail below.
Another advantage of saving up as big a deposit as you can is that it can reduce the total cost of your home loan, as interest is only charged on the money you borrow.
A fixed rate home loan is one that has an interest rate that is locked in place, or fixed, for a set period.
A variable rate home loan is one that has an interest rate that can fluctuate, depending on the market conditions and the decisions of your lender.
An interest rate is the proportion of the outstanding home loan amount that you have to pay as a fee for borrowing the money each year. A common practice is for lenders to spread out the interest you pay throughout the full term of the loan.
Canstar has a free mortgage repayment calculator that allows you to work out how much interest you might have to pay on a home loan, based on the amount you borrow and your interest rate.
Bear in mind that our calculator doesn’t include the costs of any upfront or ongoing fees and, for simplicity’s sake, it assumes your interest rate remains the same throughout the full term of the loan.
The process for refinancing a home loan is similar to applying for a new home loan. As a borrower, you have the choice of which home loan to apply for, and from which lender. You don’t have to stick with the same lender who issued your original loan.
If you do decide to switch lenders, you will have to go through a new mortgage application process, which involves paperwork and, often, application fees and charges.
However, the extra hassle and expense of switching lenders can prove financially worthwhile if you can secure a home loan with a lower interest rate.
The decision whether or not to fix your home loan is a personal one, and should be considered carefully in light of your financial needs.
For example, if you think variable interest rates will rise in the near future, getting a good deal on a fixed rate could be one way to lock in a rate you’re happy with for a few years.
On the other hand, if interest rates fall in the short term, locking in for an extended period could mean you miss out on the chance to secure a lower rate and interest repayment savings.
Of course, accurately predicting financial markets is impossible. So, to hedge your bets, you are often able to split mortgages into sums at different terms and rates.
A break cost, or break fee, is the charge some lenders apply to people who want to end their fixed-rate home loans before the end of the fixed-rate terms in their contracts. The fee is designed to compensate the financial institution for any loss of profit it faces as a result of a customer breaking the terms of the contract, including for administration and its own wholesale borrowing costs. It does not typically apply to other types of loans, such as variable-rate loans.
However, it’s worth noting that many lenders will be happy to refinance a home loan without charging a break cost if you are refinancing your loan to one with a higher rate.
The length of time it takes for a lender to approve or reject a home loan application varies, depending on factors such as the particular lender and the mortgage applicant’s financial situation.
In some cases, obtaining home loan pre-approval, or conditional approval, can speed up the time it takes a lender to assess a formal mortgage application.
Home loan pre-approval, also known as conditional approval, is the initial approval process when a bank provides a borrower with an estimate of how much they can borrow, based on the financial information they have provided.
Pre-approval does not necessarily mean the bank will approve the borrower’s formal home loan application, but it can, nonetheless, provide a borrower more confidence when working out how much they can realistically afford to spend on a property.
Lenders mortgage insurance is a type of insurance that a lender takes out to protect itself in case of default from a borrower, but which the borrower must pay for.
It usually applies to home loans with a high LVR (more than 80%), when the borrower has a deposit of less than 20% of the property’s value.
LMI is charged as either a one-off sum, which is usually added to the sum borrowed, or as a premium interest rate, charged until the home owner’s equity in their property reaches 20%.
The loan-to-value ratio (LVR) of a home loan is the amount borrowed as a proportion of the lender’s valuation of the property’s worth.
For example, a bank may approve your loan for 80% of a property’s value – an LVR of 80% – in which case you will need to pay the remaining 20% as your deposit. Many lenders’ best mortgage rates are reserved for borrowers with low LVRs.
A credit rating, or credit score, is an assessment of the creditworthiness of an individual borrower, based on their borrowing and repayment history (as shown on their credit report).
Lenders consider your credit rating when deciding whether or not to give you a loan, how much to lend you, and what interest rate you will pay.
Equity is the difference between the value of your property and the outstanding balance of the loan that was used to fund it. For example, if an owner purchases a house valued at $400,000 and pays the loan down by $100,000, they have equity in the property of $100,000.
Equity can, potentially, be negative. Negative equity occurs when a property’s value falls below the balance of its outstanding mortgage.
Property investors often use positive equity in the properties they own to access additional investment home loans.
The First Home Loan, supported by Kāinga Ora, supports FHBs who only have enough for a 5% home deposit, making it easier to get into a home with a low deposit.
Originally, the First Home Loan was only available for houses priced under strict regional price caps. However, in the 2022 Budget the price caps were removed. So, with a First Home Loan, it’s now even easier to secure a loan for a home with a deposit of just 5%.
Here are the key criteria for First Home Loan eligibility:
The First Home Grant and First Home Loan are both offered through Kāinga Ora, but they are not the same thing, although they can be used together.
The First Home grant is available to FHBs who have been contributing at least the minimum amount to KiwiSaver for three years or more. It providers eligible FHBs with:
You receive $1000 for each year you have been a KiwiSaver member, up to a total of five years. This means you could get $3000, $4000, or $5000 to put towards a deposit. If you’re buying a new build the grant doubles to $2000 per year.
Note: regional price caps still apply for homes available to purchase under the First Home Grant scheme. However, some of the caps were raised in the 2022 Budget. You can get more details from the Kāinga Ora website here.
While certainly not the norm, you may be able to secure a loan of 100% of the purchase price of a home through some lenders if you can meet certain strict conditions, such as having a guarantor on the loan. Such loans are usually determined on a case-by-case basis by the lender.
That said, it’s not common for lenders to offer home loans to borrowers with no deposit.
If someone acts as a guarantor for your loan, it means that they promise, or guarantee, to be legally liable for the loan if repayments are not made.
As such, when applying for the loan, the guarantor must also demonstrate their capacity to repay the loan.
Negative gearing is when the income (such as rent) that an investor makes from an investment property is less than the interest and fees on the home loan and the maintenance costs for the property. However, some costs associated with property investment are available as a tax deduction against an investor’s income.
A mortgage or home loan offset account is a savings account, or accounts, linked to your home loan to reduce the interest charged on the loan. The money (or credit) in the account(s) is offset daily against the loan balance, which reduces the daily mortgage interest charges.
A home loan redraw facility is a feature that enables a borrower to withdraw funds they have already paid. Usually, this is conditional on the mortgage holder being ahead on their loan repayments. A redraw facility is not available on all loans.
A mortgage broker is a type of financial professional who specialises in helping their clients to find a home loan. Their job is to gather information about the needs of their clients and to suggest lenders and products that match those needs. Once they have helped their client to select a home loan, a mortgage broker may also assist the home buyer with the application process.
A construction home loan is a type of mortgage designed for people who are building a home or doing major renovations, as opposed to buying an established property. It has a different loan structure to home loans designed for people buying existing homes.
A bridging loan is a special type of short-term loan designed to cover the cost of a second property and to give the purchaser time to sell their existing home, even if they already have a mortgage. It essentially creates a financial bridge, allowing homeowners to traverse the gap between buying and selling.
KiwiSaver is the retirement savings scheme in New Zealand.
In the KiwiSaver Scheme, members build up their savings through regular contributions from their before-tax pay, from their employer, and from the government. It is voluntary to join.
KiwiSaver does not replace New Zealand Superannuation (NZ Super), so you can receive super payments and have a KiwiSaver fund at the same time. NZ Super is the government’s pension scheme available to most New Zealand residents over 65 years old. It is not means tested.
KiwiSaver can also come in handy before you retire. You can access your savings when you buy your first home, if you have been contributing for three years or more.
Canstar puts in the hard yards here, too, by comparing KiwiSaver providers, to help give you some guidance.
You can read our full guide to KiwiSaver, and learn everything you need to know about making the right investment choices by clicking here.
When you’re a first-time home buyer, navigating the home loan process can be quite overwhelming. Obviously, any first home buyer grants and incentives are welcome if it means securing the home of your dreams faster.
Current buyer grants and incentives, include:
For more details on them all, check out our story: Help for First Home Buyers: What’s on Offer?
