Floating and fixed home loans
With a fixed and floating interest rate home loans, you can choose from three repayment options:

1. Table repayments
This is the most common type of repayment.

• Your repayments stay the same each time.
• Repayments are calculated by adding the total amount of interest over the duration of the loan to the principal (the amount you borrow), and dividing the total into equal instalments.
• Initially, you pay mostly interest.  However, with each repayment you pay more off the principal.  By the end of the loan term you are paying mostly principal.
• Your equity in your home gradually increases over time.

2. Straight line repayments
With straight line repayments the amount you pay reduces a little every time you make a repayment.

• You repay the same amount of principal every time.
• It’s calculated by dividing the total amount you borrow (the principal) into equal instalments, and applying interest to each instalment.
• Because the principal reduces each time, so does the amount of interest you pay.
• You have to be able to make the largest payments early in the loan, but you may pay less total interest over the term of your loan.

3. Interest-only loans
With interest-only loans you simply pay the interest, but none of the principal.

• Interest-only loans are usually short-term (commonly up to 3 years).  They’re, however, available for terms from one to ten years. 
• At the end of the interest-only term, you either repay the principal or take out another loan.
• They may be taken out to help keep payments low for a period, if you need tideover finance while you try to sell another home, or if you’re expecting some capital gain to help you pay off the principal at the end of the interest-only term – e.g. from the sale of your investment property.

Flexible home loans
Flexible home loans are a home loan and everyday account in one.  How and when you repay your flexible home loan is more flexible than other types of home loans. 

Flexible home loans can work well if you’re disciplined and actively manage your finances.  If you concentrate on getting your balance down as quickly as possible, you could save on overall interest payments.

How often should you make repayments?
It’s up to you how often you make your home loan repayments.  You can choose to make them weekly, fortnightly or monthly.

However, by paying more frequently you can actually save money on interest costs.  For example, by paying fortnightly instead of monthly, you actually pay a little more over the course of a year – so you reduce your principal, and your interest costs, faster.

Repayment holidays
With a floating or fixed interest rate home loan, you can apply to put your repayments on hold for up to three months (available once every two years but not available within the first two years of drawing down your loan. Other conditions may apply).  Interest will continue to accrue on the total principal amount outstanding on the loan during the holiday period.

At the end of the repayment holiday, you can either increase the amount of your repayments to meet the original end date, or extend your loan up to the maximum 30 year term.

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For borrowing over 80% of a property’s value, a Low Equity Premium on a graduated scale will apply. A copy of the Bank’s Disclosure Statement is available from any National Bank branch.