Mortgage Glossary
Understanding mortgage terminology is key to making informed decisions about your home loan. This glossary explains common terms used in New Zealand's mortgage industry.
Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on market conditions. In NZ, these are often called floating or variable rate mortgages.
Amortisation
The process of paying off a mortgage loan through regular payments over time, which include both principal and interest components.
ANZ
Australia and New Zealand Banking Group, one of the major banks offering home loans in New Zealand.
ASB
Auckland Savings Bank, now operating as ASB Bank, one of New Zealand's largest banks providing mortgage products.
Break Fee
A charge that may apply if you end a fixed-rate mortgage early in New Zealand. The amount depends on how interest rates have changed since you fixed your rate.
Bridge Loan
A temporary loan that helps you finance a new home purchase before your current home is sold.
CCCFA
Credit Contracts and Consumer Finance Act - New Zealand legislation that governs how lenders can provide credit, including mortgages.
Comparison Rate
A rate that helps you compare different home loans by combining the interest rate and most fees and charges into a single percentage figure.
Conditional Approval
Also called pre-approval, this is a lender's agreement to provide a mortgage subject to certain conditions being met, such as valuation of the property.
Deposit
The amount of money you contribute toward the purchase price of a property. In NZ, most lenders require at least 20% deposit for a home loan.
Equity
The portion of your property's value that you own outright, calculated as the property value minus the mortgage balance.
Fixed Rate Mortgage
A home loan with an interest rate that stays the same for a set period (usually 1-5 years in NZ), providing payment certainty.
Floating Rate
A variable interest rate that can change at any time, typically in line with the Official Cash Rate (OCR) set by the Reserve Bank of New Zealand.
HomeStart Grant
A New Zealand government initiative that provides financial assistance to first-home buyers who meet certain criteria.
Interest-Only Mortgage
A loan where you only pay the interest for a set period, with the principal amount remaining unchanged during that time.
KIWISaver HomeStart Grant
See HomeStart Grant. A grant available to eligible first-home buyers who are members of the KIWISaver scheme.
Lender's Mortgage Insurance (LMI)
Insurance that protects the lender if you default on your loan. In NZ, this typically applies when you have less than 20% deposit.
LVR (Loan-to-Value Ratio)
The percentage of a property's value that you're borrowing. For example, a $400,000 mortgage on a $500,000 property is 80% LVR.
Mortgagee Sale
When a lender sells a property to recover the outstanding mortgage debt after the borrower has defaulted on payments.
Offset Account
A transaction or savings account linked to your mortgage where the balance reduces the interest charged on your home loan.
OCR (Official Cash Rate)
The interest rate set by the Reserve Bank of New Zealand that influences all other interest rates in the economy, including mortgage rates.
Pre-approval
See Conditional Approval. A lender's indication of how much they may be willing to lend you before you find a property.
Principal
The original amount of money borrowed in a mortgage, not including interest or other charges.
Revolving Credit Facility
A flexible home loan that works like a large overdraft, allowing you to withdraw and repay funds as needed.
RBNZ
Reserve Bank of New Zealand - the country's central bank that sets monetary policy and regulates banks.
Settlement
The final step in the property purchase process where ownership is transferred and the mortgage funds are paid to the seller.
Title
The legal document that proves ownership of a property. In NZ, most titles are now electronic (e-title).
Unconditional Approval
Final mortgage approval given after all conditions (like valuation and insurance) have been satisfied.
Valuation
A professional assessment of a property's market value, often required by lenders before approving a mortgage.
Westpac
One of the major banks in New Zealand offering mortgage products to home buyers and investors.
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