Buying guide

What are the best first time home buyer loans?

Choosing your first home loan can be tricky - here are a few tips to make it easier.

Last updated: 24 January 2024

The most important part of any property purchase (besides the house you choose) is the loan. That’s especially true when you’re buying your first home.

Choosing a suitable home loan with a competitive interest rate, the right features and a structure that works for you can save you thousands of dollars - and days of hassle. But how can you be sure you’re choosing the best home loan for a first home buyer such as yourself? And what should you be looking for?

Get advice early for first home finance

When you’re buying your first property, chances are you’ll be new to home loans. So, as soon as you know you want to buy, it’s a great idea to speak to a mortgage broker for expert advice, tailored to your circumstances.

They’ll be able to tell you whether you’ll be able to buy a home with your current savings and income, as well as helping you choose a suitable loan, shop around and even apply for the loan.

Shop around

Don’t apply for a home loan with your current bank by default. It’s usually a better idea to shop around lenders to find the best first time home buyer loan for you. Get started by researching who’s offering the most competitive interest rates, the best customer service, and benefits for first home buyers.

Have a Google

It’s a great idea to research home loans the same way that you research any other purchase. Jump on Google and browse each prospective lender’s website, look at online reviews, compare interest rates and home loan features. This is worth doing even if you’re speaking to a mortgage broker.

Find a competitive interest rate

In the vast majority of cases the most important thing to look for in a home loan is a low interest rate. At the moment, the best first home buyer interest rate on the market that we’re aware of is the Simplicity First Home Loan (available to Simplicity members only).

At the time of writing (22.01.24) the loan has a floating interest rate of 6.4%. The floating rates of most major banks are around 8.6%, and their one year fixed rates are around 7.3% to 7.99%, so the Simplicity loan offers great value. The fact that it's floating could also be beneficial (more on floating rates below).

The most important part of buying your first home? Arranging a home loan.

Think about your mortgage’s structure

When looking for the best home loan for first home buyers, mortgage structure is important. Here are a few points to consider:

  • Fixing your interest rate provides more certainty. Your repayments will stay the same during the fixed period but you may miss out on savings if interest rates drop, and you may be charged fees for making extra repayments or repaying your mortgage during the fixed period.
  • Floating your interest rate provides more flexibility. Your repayments may change slightly as interest rates fluctuate, but you’ll be able to make extra repayments, switch to a new lender, or repay your mortgage at any time, usually without extra charges.
  • The majority of mortgages in Aotearoa are on fixed interest rates because they tend to be lower. But it’s possible to fix the majority of your mortgage, and float a smaller portion to get the best of both worlds.
  • It’s hard to figure out how long to fix your interest rate because no one knows where interest rates are headed in future. One option that many experts recommend is to try ‘interest rate averaging’. This means fixing different portions of your mortgage for different periods of time - for example a third may be fixed for a year, a third for two years and a third for three. This shields you from large fluctuations in interest rates.

Other handy features to consider include revolving credits and offset accounts.

  • A revolving credit turns your mortgage into something like a big credit card. You can get paid into your mortgage account to reduce the interest you pay, then you can access your mortgage repayments should you need them.
  • An offset account links a savings account to your mortgage. You then pay interest on your mortgage principal minus whatever is in your offset account, reducing the total interest you pay.

Everyone's financial habits, circumstances and goals are unique, so their mortgage should be unique too. For that reason, there’s no one home loan that’s best for all first home buyers - if you’re buying a home, you’ll need to get sound advice and do the research to ensure you secure the best mortgage for you.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.


Ben Tutty
Ben Tutty

Ben Tutty is a regular contributor for Trade Me and he's also contributed to Stuff and the Informed Investor. He's got 10+ years experience as both a journalist and website copywriter, specialising in real estate, finance and tourism. Ben lives in Wānaka with his partner and his best mate (Finnegan the whippet).