Paying your mortgage: the early days

Life has ups and downs, and so does your mortgage. Find out how to make the most of your mortgage in the early days.

5 minute read

Once the keys have finally been handed over, the realities of your new mortgage can start to hit home. While it’s exciting to own your first home, the thought of several years of financial commitment can feel overwhelming.

But just like our lives, mortgages constantly evolve – and any feelings of discomfort won’t last forever. To help you come to grips with your new homeowner status, we’re breaking down the life cycle of a mortgage. From the first celebratory glass of champagne, all the way to the last. Let’s break down the different stages of your mortgage - with things to look out for and think about along the way.

Settling into your mortgage

After some well-deserved celebrating, a few nerves can start to set in. You might feel like you’re not chipping away at your home loan quickly enough, or like your repayments are taking their toll on your budget. The good news is you’re not alone, and once you get to know the ins and outs of your mortgage, it’ll all feel much more manageable.

How paying your mortgage actually works

Most mortgages are made up of two parts:

• principal – i.e. the amount you’ve borrowed from the bank to buy your home
• interest – i.e. the additional amount you pay to the bank for providing the principal, calculated based on a percentage of the outstanding loan balance.

On a standard table home loan, a considerable portion of your repayments will go towards interest initially, rather than the loan itself. Progress can seem slow at first, and feelings of disheartenment can creep in. But as your principal decreases over time, the amount of interest you pay will decrease with it. Which means with time, more and more of your repayments will be paying off the actual loan.

So, while you might feel like your repayments aren’t making much of a dent right now, give it time. Soon enough that snowball effect will kick in, and you’ll feel like you’re making progress.

Your mortgage’s key moments

In the first year of your mortgage, there are a few milestones to take note of:

• 0-1 month – check you’re all set up to make your first repayment on time
• 2 months – take a moment to double-check that your repayments have been going through correctly
• 6 months – review your finances to make sure everything’s tracking as it should be
• 12 months – consider reviewing your repayments and your mortgage’s structure (more on this shortly). Or if you’re on a one-year fixed rate term, now’s the time to think about what to do next. 

Breaking in your new budget

To help make your new financial situation a little easier to get your head around, it’s worth considering other ways to cut costs. You could try:

• showing off your new home by hosting dinner parties instead of going out – think potluck or a BYO
• using a budgeting tool to help you keep track of your incomings and outgoings
• getting to know your new neighbourhood by walking instead of driving or using public transport
• thinking about downsizing to just one car.

Next, it's time to consider your mortgage a few years in.

To talk more about your mortgage, get in touch with us by visiting a branch or contacting us on 0800 275 269.

Related articles

Related products

Related tools

Manage your home loan

Find out more

This material is for general information purposes only and does not constitute, and is not intended as, personalised financial advice or as a replacement for legal advice. BNZ strongly recommends you seek advice specific to your personal financial or legal situation from a qualified adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.

All home loans are subject to our lending criteria (including minimum equity requirements), terms and fees. Interest rates are subject to change. An establishment fee of up to $150 may apply. Not for business purposes. Read our full home loans terms and conditions.

References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.