Fixed, floating and split mortgages in New Zealand

Fixed rates create a dated commitment

Sorted describes fixed periods commonly lasting from months to several years. Payments are more predictable during that period, but lenders often limit increases or lump sums and may charge a break fee if the contract is ended early.

At expiry, the borrower can refix, move to floating or consider another lender. The old fixed rate does not continue automatically as a long-term forecast.

Floating and split structures add flexibility

Floating loans generally allow more repayment flexibility but the rate and required amount can change. Splitting can place most debt on fixed terms while keeping a portion floating for extra repayments, offset or another flexible structure.

For example, surplus cash might be directed to a floating portion while the fixed portion remains within its contractual limit. That choice should consider each rate and fee rather than assuming the flexible portion is always the best target.

Map the mortgage before modelling

1. List each split’s balance, rate and fixed-expiry date.
2. Record repayment frequency and required amount.
3. Check extra-payment limits and break-fee wording.
4. Identify any offset or revolving-credit portion.
5. Run higher and lower floating-rate scenarios.
6. Review the structure before every refix date.

Risks hidden by a blended rate

A blended rate is a shorthand for combined interest, not a substitute for separate schedules when dates, limits and features differ. One split may refix while another remains floating, making a single constant-rate result misleading.

• Name the intended split for every extra payment.
• Keep a buffer for floating-rate rises.
• Obtain a break-fee quote before restructuring.
• Compare fees as well as rates.
• Do not predict a future refix rate.

Use a calculator as a scenario, not a promise

Payoff Atlas can use a blended rate for a rough split-loan scenario and flags that assumption. Run separate calculations when the portions have materially different rates, dates, limits or offset treatment.

The New Zealand model accrues interest across actual calendar days, using 365 days or 366 in a leap year. It supports monthly, fortnightly and weekly schedules and treats a stable offset balance separately from principal.

The estimate holds the entered rate constant, assumes extras reach principal and excludes revolving-credit cash flow. Fixed-loan limits, refix rates, break fees, posting and lender rounding can change the actual result.

Review the plan before money leaves

Compare a zero-extra case, the intended plan and an interrupted plan with identical starting inputs. For floating or split debt, rerun at other rates without presenting them as predictions. Stop the projection at a refix date when the next rate is not known.

Keep the loan agreement, latest statement and written lender answers about fixed-loan limits, break fees and payment allocation. Model each split separately when its rate, fixed expiry, offset treatment or flexibility differs.

• Secure required repayments and essential costs first.
• Keep emergency and planned-expense cash accessible.
• Name the intended loan split for an extra payment.
• Verify the transaction and principal on the next statement.
• Rerun after a refix, rate change, fee or product restructure.