A lower interest rate isn’t the only key to financial freedom.

While interest rates are just one component of the broader financial picture for most Kiwis, it’s fair to say they dominate the conversation. But now, with two consecutive cuts delivering hope for hard-pressed owners and potential first home buyers, New Zealand Home Loans (NZHL) say it isn’t so much the interest rate that determines your path to financial freedom but rather how your loan is structured and paid down.

“Yes, interest rates are important, and lower rates can impact short-term costs, but the most influential factors supporting financial wellbeing are loan structure and personalised advice,” explains Jo McRae, from NZHL’s North Harbour office.

She notes that high interest rates and the rising cost of living have forced many families to monitor their budgets more closely but advises that an NZHL Mortgage Mentor can help tailor a bespoke financial plan to navigate these challenges and support a positive financial future. However, Jo emphasises that clients must commit to following their financial plan.

“It’s about getting expert advice to help you understand your financial goals and structure your loan to make the best long-term use of your money,” she says.

Rather than a set-and-forget approach, NZHL supports homeowners in adjusting their financial plans as circumstances evolve. “Our Mortgage Mentors are the go-to people for clients – whether they need help, want to review their progress or update their plans,” Jo explains.

Jo highlights ‘DebtNav’, NZHL’s online debt monitoring tool that allows clients to incorporate short-term goals like a holiday or home renovation and see how those decisions will impact their mortgage.

New Zealand’s ‘biggest misconception’ about home loans

According to Brendon Hunt, from NZHL Dunedin Metro office, one of the most common misconceptions Kiwis have is that a 30-year mortgage is the only option for homeownership – along with the belief that interest rates are the primary financial factor.

“The reality is there are other options. And among those options, there is no better way to achieve financial freedom than paying down your home loan faster than over three decades.”

In 2018, customer Anna* worked with NZHL to customise her home loan. As a result, she is on track to be mortgage-free by mid 2027, taking slightly more than 20 years off the standard loan period and reducing the total she pays for her home by $384,413 (this was her position in April 2024, which may change owing to interest rate fluctuations).

Often these real-life examples seem to be too good to be true, but NZHL Mortgage Mentors say customers can leapfrog their way into better outcomes, as Lisa and Maurice quickly discovered. When they joined NZHL in 2021, they had 17 years left on a mortgage balance of $236,000. With their Mortgage Mentor assessing their financial situation and creating a plan that worked, the couple is on track to save $96,932 in interest with their mortgage paid off in mid-2028.

The power of knowledge

NZHL says stories like Anna’s and Lisa and Maurice’s are possible with sound advice, clear goals and determination.

“Managing a home loan is a bit like running a business,” She explains. “You need a plan, and you need to know your numbers with an accurate view of income and expenses against a budget, and how these numbers affect your goals.”

However, she says many homeowners have never had their home loan properly explained, particularly around their ability to borrow, the technical aspects, and – crucially – the available options to pay back the loan. “We’ve often found people have no idea who to talk to at their bank about their loan and how their repayments are going.”

Many don’t even realise they have options for setting up their home loan, thinking they have to borrow the full amount on a single loan over the maximum term, which can be problematic when trying to pay it down.

“Understanding where you currently are financially, your options and their impact is essential to making good decisions,” she continues, noting that NZHL always advises of the available options. “There are other ways to pay down your home loan, make the best use of available money, and achieve financial freedom much faster, and that’s where NZHL can help.”

Personalising your mortgage strategy

Despite what many might think, Brendon stresses that mortgages don’t ‘fit into a box’.

“They work best when personalised to your needs rather than those of your lender. Everybody’s different and has different priorities. It’s about personalising to suit your current circumstances and future plans – if you are looking to sell soon, take a holiday, grow your family, or are focused on wealth creation, these and other factors impact loan structure, which in turn affects long-term costs.”

Finally, Brendon says first-home buyers are the one group likely to have the closest eye on interest rates as they are reduced. His advice is clear: ask for help from a qualified adviser. “A mortgage is a big decision and working through your finances can seem like a lot to manage. We don’t judge – our goal is to help you get into a home, pay off your loan while maintaining your lifestyle, and build a strong foundation for your financial future.”

*Name changed for privacy reasons.