NZ Revolving Credit Mortgage Explained (With Free Calculator)
How New Zealand revolving credit home loans work, why they are not an Australian-style offset, and when salary parking actually beats a fixed table loan.
NZ Revolving Credit Mortgage Explained
Search "revolving credit mortgage" and you will find a lot of Australian offset content dressed up with NZ branding. That mix-up costs people money. In New Zealand, revolving credit is the loan - a secured overdraft-style facility - not a linked savings balance sitting beside a table loan.
Use the free NZ revolving credit calculator to size the interest effect with your own numbers.
The 30-second summary
- Revolving credit = approved limit + interest on the drawn balance.
- Salary parking only helps while pay actually sits in the facility.
- Floating rates usually sit above comparable fixed rates, so flexibility can cost more than it saves.
- Worked defaults: $80k drawn, 7% floating, $6k net income, 0.5 park fraction → about $5,495/year revolving interest vs $4,318 on a 5.5% fixed comparison.
- Pair with the NZ break fee calculator before you pay to exit a fixed rate.
Offset vs revolving credit (do not port the AU model)
| Australian offset | NZ revolving credit | |
|---|---|---|
| What it is | Linked savings / transaction account | The home loan facility itself |
| How interest falls | Savings balance offsets loan interest | Lower drawn balance = less interest |
| Principal | Loan principal unchanged by offset balance | Drawn balance is what you owe |
| Rate type | Usually linked to a P&I or IO loan rate | Almost always floating |
If you copy an AU offset spreadsheet into an NZ advice file, you are modelling the wrong product.
Worked example (engine-verified)
Inputs matching the calculator defaults:
- Credit limit $100,000
- Average drawn $80,000
- Floating 7.00%
- Monthly net income $6,000
- Park fraction 0.5
- Fixed comparison 5.50%
Results:
| Metric | Amount |
|---|---|
| Effective average balance | $78,500 |
| Revolving interest (with parking) | $5,495 |
| Revolving interest (no parking) | $5,600 |
| Salary parking saving | $105 |
| Fixed interest (same effective balance) | $4,318 |
| Rate premium cost | $1,178 |
| Net vs fixed | −$1,095 |
Salary parking is real, but small here. The floating premium dominates. That is the honest answer for many households - revolving credit is often bought for cash-flow control, not because it automatically beats a sharp fixed rate.
When the product earns its keep
- High, regular income lands in the facility and spends slowly
- The floating-to-fixed gap is narrow
- You need redraw access without applying for a new loan
- You will not treat the limit as free spending money
Next steps
- Run your numbers in the revolving credit calculator.
- If you are leaving a fixed rate, estimate the exit cost with the break fee calculator.
- Confirm product rules, fees and current rates with your lender or broker before switching.
Flexibility has a price. Make sure you are measuring it, not assuming the Australian offset story applies.
Frequently asked questions
What is a revolving credit mortgage in New Zealand?
A home loan structured like a secured overdraft. You have an approved credit limit, draw what you need, and pay interest daily on the drawn balance. The facility is the loan - not a separate savings account.
How is it different from an Australian offset account?
An offset is a linked savings or transaction account that reduces interest on a separate home loan without changing the loan principal. NZ revolving credit is the loan itself. Parking salary lowers the drawn balance directly.
How does salary parking save money?
While pay sits in the facility, the drawn balance is lower, so daily interest is lower. Our calculator approximates the average reduction as monthly net income × park fraction × 0.5.
Does revolving credit always beat a fixed loan?
No. Floating revolving rates usually sit above fixed table-loan rates. In a typical $80k-drawn example at 7% floating vs 5.5% fixed, salary parking saves about $105/year but the rate premium costs about $1,178.
Who is revolving credit best for?
Borrowers who can park large cash-flows for most of the month, want redraw flexibility, and accept a floating rate. It is a cash-management tool first, an interest-saving tool second.
Can I break a fixed loan to move into revolving credit?
Yes, but price the break fee first. Use the NZ break fee calculator, then compare that cost to the expected revolving benefit.
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