This is the most commonly used loan structure in New Zealand. The repayments are calculated and agreed on at the start and can vary based on the interest rates. This structure should in theory stay the same throughout the loan (this is where the name comes from), but in reality, interest rates vary and will change the repayment amount. The loan is paid off through a process called amortization. This is where the principal of the loan is paid off over regular installments. The repayments in a typical table mortgage will be split between principal and interest. At first, the repayment will have a much larger interest portion compared to the principal, but over time, the principal portion will increase until the loan is completely paid off. This can be seen in the figure bellow:
With a reducing mortgage, the same principal is paid throughout the loan an the interest portion is charged on the remaining balance. This means that the repayments will start off very high, and reduce over time.
A revolving credit is effectively an overdraft facility secured over your house. A part of the loan is partitioned to allow for easy withdrawal or contribution. This partition is usually charged a variable interest rate based on the balance withdrawn. For example, if you have a $50,000 revolving credit facility and withdraw $10,000, you will only need to pay interest on $10,000. There are often options to put a repayment schedule in place to ensure that the withdrawn amount is paid off. In some cases, this facility will incur a monthly fee.
In an interest only loan, no principal is required until the agreed date. These loans have a shorter term and typically last for two to five years.