How home loans work – learn about repayments & interest | ASB

Most New Zealanders rely on a home loan to help achieve their dream of owning a home, so it’s important to understand how they work. A home loan is like a large loan from your bank where your house acts as security for the loan. When considering a home loan it’s important to do the sums first, and ensure you don’t overcommit. Like any loan, your home loan needs to be paid back within a set time period and at an agreed interest rate. Most home loans give you 25 years or so to repay them. A longer term makes the repayments lower, but it also means the total interest you pay overtime could be more. You can choose between a fixed or variable interest rate. A fixed interest rate locks in a rate for a particular time period, which means you know exactly what your regular repayments will be. A variable interest rate changes according to market conditions, so it can go up, but it can also go down. A great way to get a feel for the numbers is with an online home loan calculator. It gives you an indication of how much your home loan repayments could be for the house you want to buy. To see if you can live comfortably with a home loan, try putting aside the difference between your current rent and your likely home loan repayment for two or three months. It will demonstrate the change in your position – and help you save for your deposit! A home loan is a big commitment, so take the time to make sure you’re ready for it. For other ideas, check out more ASB money tips.

Paul Whisler


  1. Thank you SO much!!
    That was ten times more understandable than when my parents try to explain it to me!!
    Great video!

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