The Saver

Disciplined saver, lots of income, not much equity. Savers are usually easy to spot because they’re usually sitting on a good surplus in a savings account. They’re usually wary of the rainy day when they’ll need it. But for many, that’s not a good use of their money. If you’re a saver, a revolving credit or another type of offset account might work better. A revolving credit facility is like a large overdraft, but at floating mortgage rates.

Put your savings into this account too, so you, rather than the bank, benefits from the interest rate margin. The best way to explain an ‘offset’ is if you had a NZ$100,000 floating mortgage and a NZ$30,000 savings account. You’ll only pay interest on the difference between the two, in this case NZ$70,000.

The Scrimper

Lower income, finds it hard to save, money’s tight. If you don’t have much spare cash floating around, fixed rates can be a good way to go here. They can give you certainty, so you’ll always know how much you’ll pay. It’s worth thinking about splitting your fixed rate mortgage into two or three chunks. If rates were to spike up, you won’t have all your debt coming off a fixed rate at the same time. An example: For a NZ$300,000 mortgage, you might decide to put NZ$100,000 on a one-year rate, NZ$100,000 on a two-year rate and NZ$100,000 on a three-year rate.

The Spender

Money disappears like water, has only a small deposit. If you’re a spender and aren’t the best with money, avoid revolving credit. Spenders will use any excess funds to get the next pair of shoes or a trip to Fiji. Revolving credit is not your friend! Take away temptation. This means a fixed mortgage. Often it’s high-income earners who fit into this category because they’re used to having more spending money. If so, they should look to put themselves under a bit more pressure and lock in higher repayments than they need. This may offset some of their excesses elsewhere.

The Starter

First-home buyer, new to a mortgage. Often people don’t know what their money personality is until they’ve taken out a whopping big mortgage. It’s worth being a bit flexible here, to see if you’re a saver, or if your spending personality takes over and you need to be careful. If you don’t know which type you are, split your mortgage into a few sections. Keep most fixed, but put a small amount on revolving credit. Put income onto the revolving credit facility, and charge your living expenses to your credit card, paying it off just before you’re charged interest, using your revolving credit. But if you’re finding you’re drawing on your revolving credit for other reasons, fix the mortgage and remove the revolving credit.

The Supersizer

Already has a home partly paid off, payments are no stress. If you’re a Supersizer, look at using a revolving credit facility, as long as you’re not a spender. Or, look to increase what you’re paying on your fixed mortgage splits. With most banks, even if your mortgage is fixed, you’re able to pay a bit extra off without penalty. Check your options before you do this. This option is a great way to accelerate paying off your mortgage, so you can get that noose around your neck off faster.

Published 28 November 2019

Disclaimer: This article is general in nature only and has not taken into account any particular person's objectives or circumstances. Seek financial advice before making any decisions on your mortgage structure.