Understanding Revolving Credit: A Flexible Way to Pay Off Your Mortgage Faster

When it comes to home loans, most New Zealanders are familiar with the traditional fixed or floating options. But there’s another structure that can offer powerful flexibility – if used wisely. 

It’s called Revolving Credit.

What Is a Revolving Credit?

Think of it like a giant overdraft linked to your mortgage. 

Your salary or income is paid directly into the account, immediately reducing your home loan balance. Because mortgage interest is calculated daily, every dollar sitting in your revolving credit account works in your favour – reducing the amount of interest you pay.

You can then withdraw funds as you need them, whether that’s for bills, renovations, or unexpected expenses. It’s designed to give you flexibility while helping you pay off your mortgage faster.

How It Works in Practice

Let’s say your home loan balance is $500,000.

Your $5,000 salary is paid into your revolving credit account, dropping the balance to $495,000. Over the next few weeks, you spend $4,000 on living costs, which raises the balance back to $499,000.

Even though your balance went back up, you’ve still saved interest for the time your income reduced the loan. Multiply that over months and years, and the savings can really add up.

The Benefits

The biggest advantage of Revolving Credit is flexibility. You’re in control of how much you pay off, when, and how you use the funds available. It can be a great fit for people who:

• Have a consistent income and good spending discipline
• Want the ability to access funds easily if needed
• Are motivated to pay down their mortgage faster

The Catch: Discipline Matters

Revolving Credit isn’t for everyone. Because the funds are easily accessible, it can be tempting to treat it like extra cash. If you keep dipping into the account, your balance may not reduce over time – and the benefit disappears.

Used wisely, however, it’s a smart way to minimise interest and gain flexibility as your financial situation evolves.

Is Revolving Credit Right for You?

Revolving Credit can be a powerful tool when it suits your lifestyle and spending habits.

At The Mortgage Hub, our advisers can help you decide whether this structure works best for your goals – or whether an alternative like an Offset Home Loan might be a better fit.

For a simple walkthrough of how Revolving Credit works in real life, watch the video by our Director, Mils Muliaina.

Our advice is always free, and tailored to your situation.

If you’d like to explore how Revolving Credit could help you get ahead on your mortgage, get in touch with The Mortgage Hub today.