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What if you could pay off your mortgage sooner than planned? Revolving mortgages are a valid option here in New Zealand - use them the right way and you could be on the fast track to being mortgage-free and pay thousands less in interest.

Of course, that's assuming that you spend less than you earn, and your surplus income goes towards reducing the principal!

Think of a revolving mortgage like an immense overdraft. Your balance goes up and down as money flows in and out of your account. Interest is calculated daily on the balance, so the idea is to keep it low by leaving behind as much money in the account as possible at the end of each pay cycle. They can work well for people with lumpy incomes, because there are no fixed repayments. (Read more about the different types of mortgages.)

Occasionally we get questions from readers about how best to manage a revolving mortgage, so we consulted David Boyle, our GM of Education here at the Commission for Financial Capability, to get his top tips.  

Here’s what he had to say:

You need a budget

"Make sure you include your mortgage commitment as part of your living expenses. By that I mean each fortnight or month the overall principal should be coming down by at least that amount.

"It's so important to have a budget so you know exactly where your spending is going. Don't forget about those less frequent bills you might pay quarterly or annually, and things like dentist visits and car repairs.

"In a nutshell, if you are able to budget and stick to it then this is for you. If you are likely to not stick to a budget and perhaps look to use the mortgage money for buying other stuff, then it's not!"

Otherwise, it's easy to get in over your head

"It can be really easy not to pay the mortgage - some get into trouble. They use it as an overdraft instead of leaving enough to bring down the mortgage, which is very dangerous given the length of the loan term, and compound interest cost can really start getting out of hand.

"The other risk is that if interest rates go up, your total mortgage repayments will also go up. This means you eat away at less of your principal (unless you spend less and leave more in your account towards your mortgage) and instead mostly pay interest."

Run your numbers now

Budgeting tool

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Comments (4)

Gravatar for Wayne


1:51pm | 19 Jan 2023

Am I able to use my revolving mortgage to paydown my other mortgages with the same bank, when I have a surplus? Last year one of my mortgages was up for review and I paid down $++++, which was the amount of my revolving mortgage. I was not charged a fee to do this lump sum payment.

If I had a surplus that was larger than my revolving mortgage facility, can I pay an amount larger than my revolving mortgage (if in surplus) e.g. my revolving mortgage is $50k but I have a surplus of $80k, can I pay the $80k down on my other mortgage when it is reviewed? or even before?

Gravatar for

6:05pm | 20 Mar 2020

BNZ offers Total Money, which subtracts the savings off the borrowed amount.

Gravatar for

8:22pm | 31 Jan 2019

Hi there, we have revolving credit but also have other savings accounts we use for specific things. We think it might be best to add that to the revolving credit but want to make sure the savings is there when we need it. What is the advice around this?

Gravatar for janice muir

janice muir

4:00pm | 8 Nov 2018

i have just moved to a variable morgage this allows me to pay alot of extra and really reduce my morgage wih no fixed break costs