What Is a Table Loan vs Reducing Loan in NZ?
When taking out a home loan in New Zealand, most buyers focus on the interest rate and deposit — but the type of loan repayment structure you choose is just as important. Two of the most common options are table loans and reducing loans.
Understanding the difference can help you choose a structure that suits your cash flow, long-term goals, and lifestyle. Here’s how each option works — and which one might be right for you.
What Is a Table Loan?
A table loan is the most common type of mortgage in New Zealand, especially for first-home buyers.
With a table loan:
You make regular repayments (weekly, fortnightly, or monthly)
Each repayment includes both interest and principal
Your repayment amount stays the same during a fixed-rate period
At the start of the loan, a larger portion of your payment goes toward interest. Over time, more of each repayment goes toward reducing the loan balance.
Pros of a Table Loan
Predictable repayments, making budgeting easier
Gradual reduction of your loan over time
Commonly required by banks for owner-occupied homes
Easy to understand and manage
Cons of a Table Loan
You pay more interest overall compared to a reducing loan
Slower reduction of the loan balance in the early years
For most homeowners, the stability and simplicity of a table loan make it the default choice.
What Is a Reducing Loan?
A reducing loan (also known as a principal-and-interest reducing balance loan) works differently.
With a reducing loan:
You pay a fixed amount of principal each period
Interest is calculated on the remaining balance
Your total repayments decrease over time
This means repayments start higher but gradually reduce as the loan balance shrinks.
Pros of a Reducing Loan
Lower total interest paid over the life of the loan
Faster reduction of the loan balance
Repayments become easier over time
Cons of a Reducing Loan
Higher initial repayments, which can strain early cash flow
Less common and not always offered by all lenders
Requires stronger affordability upfront
Reducing loans are often used for shorter-term lending or by borrowers with strong incomes who want to minimise interest costs.
Table Loan vs Reducing Loan: Which Is Better?
There’s no one-size-fits-all answer — it depends on your financial situation and priorities.
Choose a table loan if:
You want stable, predictable repayments
You’re a first-home buyer managing tight budgets
You prefer simplicity and consistency
Choose a reducing loan if:
You can afford higher repayments initially
You want to minimise total interest
You’re focused on repaying your mortgage faster
Some borrowers even combine strategies — using a table loan for most of the mortgage and making extra repayments to accelerate payoff without committing to higher required payments.
Final Thoughts
The difference between a table loan and a reducing loan can add up to tens of thousands of dollars over the life of a mortgage. Choosing the right structure from the start — or adjusting it later — can make a meaningful impact on your financial future.
A mortgage adviser can help you compare repayment types, model the long-term costs, and structure your loan in a way that balances affordability today with freedom tomorrow.
Because the best mortgage isn’t just about the rate — it’s about how the loan works for you.