.png)
Think of revolving credit as a large overdraft account that’s secured by your home. Unlike regular mortgages with set payments, a
revolving credit account becomes your main banking account where your salary/wages go in and your bills come out. Your mortgage becomes a
flexible credit line with a limit based on your home’s value. The amount you owe goes up and down as money moves in and out, with
interest calculated daily on exactly what you owe at that moment.
With revolving credit, interest is worked out every day, not monthly. When your pay goes into your account, it instantly reduces your loan balance, cutting the interest charged from that day. With regular mortgages, extra payments might not affect your interest until the next month. For example, if your $8,000 monthly pay sits in your account for a few days before you spend it, you’re reducing your mortgage by $8,000 for those few days - saving interest that adds up over time.
When your salary/wages go into a regular everyday bank account it earns very little interest, while your mortgage is charged at a much higher interest rate. This is a lost opportunity or “dead money.” By putting all your income straight into your revolving credit mortgage, every dollar works to reduce your loan right away, making the most of your money.
Unlike regular mortgages with fixed payment schedules, a revolving credit lets you be flexible. There are no fixed payment amounts or due dates (you do pay interest only on the balance owing though), enabling you to adjust your repayment strategy based on your financial situation. When you earn more, you can reduce your balance more; when money is tight, you have the flexibility to manage essential expenses without penalty.
One of the biggest benefits of a revolving credit is easy access to your home’s equity without refinancing or getting new loans.
A revolving credit gives you a simple way to pay for valuable home improvements. Instead of getting a separate loan with higher interest, you can use funds from your revolving credit facility. Often, the improved property value offsets the extra debt, while making your home better to live in and potentially worth more.
Life brings big costs - education, cars, or unexpected bills. Instead of using high interest personal loans or credit cards, your revolving credit gives you access to money at lower interest rates.
For savvy homeowners, a revolving credit can help with smart investments. Whether it’s financing the deposit on an investment property, funding a business, or other opportunities, being able to access money quickly and cheaply gives you financial flexibility.
The flexibility of a revolving credit requires good money management. Without fixed payments, it’s up to you to keep reducing your debt. This works well for people who are good with budgets but might be challenging for others.
Revolving credit facilities typically operate on floating or variable interest rates, meaning your costs will change with market conditions. This can be good when rates fall, but remember to plan for possible increases as well.
Not all NZ banks offer the same revolving credit products. Main providers include Kiwibank, Westpac, ASB, and BNZ, each with different terms. Working with a Mortgage Adviser helps you find the best option for your needs.
Many homeowners can benefit from splitting their mortgage - having some on a revolving credit and some on fixed-rate portions. This balanced approach gives you the flexibility and potential savings of revolving credit while keeping the certainty of fixed rates for part of your loan. The best split depends on your financial situation, goals, and comfort with risk. A full review of your circumstances helps determine the best structure.
Revolving credit works well for:
It might not suit:
A revolving credit mortgage is a clever approach that, when used well, can help you become mortgage-free faster while giving you financial flexibility. The potential interest savings and easy access to your home’s equity make it worth considering for many kiwi homeowners.
However, success with a revolving credit isn’t just about the product - it’s about how it’s set up, planned, and managed for your specific situation.
Every homeowner’s situation is unique, with different goals, financial circumstances, and preferences. Feel free to get in touch to see how a revolving credit might improve your mortgage strategy and help you reach financial freedom sooner.