Buying a home is one of the biggest financial decisions for anyone living in New Zealand. Whether you’re a first-time buyer or refinancing your existing loan, understanding how to calculate mortgage repayments is crucial for smart financial planning.
By knowing how your interest rate, loan amount, and repayment term interact, you can make informed choices that save thousands of dollars over the life of your mortgage.
Mortgage repayments in New Zealand are typically made weekly, fortnightly, or monthly. The repayment amount depends on three major factors — the total loan amount, the interest rate charged by your bank, and the term (duration) of your loan.
Let’s break down how mortgage repayments are calculated and how you can estimate them manually or with an online calculator.
Understanding Mortgage Repayments
A mortgage repayment includes two parts — principal and interest. The principal is the amount you borrowed, and the interest is the cost of borrowing that money from your lender. Early in your mortgage,
most of your repayment goes towards interest, but over time, as the loan balance reduces, more of your payment goes toward paying off the principal.
For example, if you take a $600,000 loan at a 6.5% annual interest rate for 25 years, your repayments will include both the interest cost and a portion of the loan principal each month.
Understanding this breakdown helps you manage your mortgage smarter and plan for extra repayments to reduce long-term costs.
The Basic Formula to Calculate Mortgage Repayments
The manual calculation for mortgage repayments uses the amortization formula:
M = P × [r(1 + r)^n] / [(1 + r)^n – 1]
Where:
M = monthly repayment
P = principal loan amount
r = monthly interest rate (annual interest ÷ 12)
n = total number of payments (loan term in years × 12)
Let’s apply it to an example:
Loan amount (P) = $600,000
Interest rate = 6.5% (annual) → monthly rate = 0.065 ÷ 12 = 0.0054167
Loan term = 25 years → total months = 25 × 12 = 300
Plug these values into the formula:
M = 600,000 × [0.0054167(1 + 0.0054167)^300] / [(1 + 0.0054167)^300 – 1]
M = approximately $4,052 per month
So, your monthly repayment for a $600,000 loan at 6.5% over 25 years would be around $4,052.
Factors That Affect Your Mortgage Repayments
Several elements determine how much you’ll pay in total over your loan term.
Interest Rate: The most significant factor. Even a small difference in rates can save or cost you thousands. For instance, a 0.5% drop in interest on a $600,000 loan can save more than $50,000 over 25 years.
Loan Term: The longer your loan, the smaller your monthly payments, but you’ll pay more interest overall. A 30-year mortgage offers lower repayments, while a 15-year loan costs more monthly but saves interest long-term.
Repayment Frequency: Paying weekly or fortnightly instead of monthly can slightly reduce your total interest because you pay more frequently, lowering the principal faster.
Deposit Size: A larger deposit means a smaller loan, reducing your repayments. Borrowing less than 80% of a property’s value can also help you avoid lender’s mortgage insurance and secure a lower rate.
Fixed vs Floating Rates
In New Zealand, you can choose between a fixed or floating mortgage rate, or a combination of both (split loan).
A fixed rate means your interest stays the same for a set period, giving you stability and predictable payments. A floating rate, however, can change with the market — it might go up or down depending on the Reserve Bank’s Official Cash Rate (OCR). Floating loans offer flexibility, allowing you to make extra payments without penalty, which can shorten your loan term and reduce total interest.
Many New Zealanders prefer splitting their mortgage — for example, fixing 70% for stability and keeping 30% floating for flexibility.
How to Calculate Your Mortgage Manually
You can estimate repayments manually using the amortization formula mentioned earlier, but it’s easier to use online tools. Simply enter your loan amount, interest rate, and term to get instant results.
To make it even simpler, use our [Mortgage Repayment Calculator NZ] on CalculatorNZ.com. It instantly shows your weekly, fortnightly, and monthly repayment estimates, including how much interest you’ll pay over the life of the loan.
Example Calculation
Let’s say you borrow $500,000 for 25 years at an interest rate of 7%.
Your approximate monthly repayment will be $3,533.
If you switch to fortnightly payments, each payment would be around $1,766, helping you repay the loan slightly faster and save interest in the long run.
Tips to Reduce Your Mortgage Repayments
Make extra repayments whenever possible. Even a small extra payment every month can shave years off your mortgage term.
Refinance when rates drop. Keeping track of the Reserve Bank’s OCR changes can help you switch to a better deal.
Consider using an offset account if your bank offers one. Linking your savings account to your mortgage can reduce the interest charged.
Avoid extending your loan term unnecessarily — while it lowers monthly payments, it increases total interest.
Official Interest Rate Source
Stay updated with the latest interest rate decisions on the Reserve Bank of New Zealand – Official Cash Rate page.
FAQs
1. What is the average mortgage rate in New Zealand in 2025?
The average mortgage rate in New Zealand is between 6.5% and 7.5%, depending on loan type and lender.
2. Can I calculate mortgage repayments manually without a calculator?
Yes, you can use the amortization formula, but an online calculator gives faster and more accurate results.
3. How often should I review my mortgage rate?
It’s smart to review your rate every 12–24 months, especially if the Reserve Bank adjusts the OCR.
4. Does paying weekly save more than monthly?
Yes, weekly or fortnightly payments help reduce total interest by slightly shortening your loan term.
5. What’s better — fixed or floating mortgage rates?
It depends on your financial stability and market conditions. Fixed gives certainty, while floating offers flexibility.