NZ home loans: An honest review

You might have seen NZ Home Loans’ ads on Facebook or YouTube, where they share stories of Kiwis paying off their mortgages in record time.

Which makes you think: “Does it really work?” and “Can they really help me pay off my mortgage faster?”

The truth is, the strategies NZHL use are not a secret. In all honesty any mortgage broker can help set your mortgage in a similar way to pay down debt faster. So, why go to NZHL?

NZHL is unique because paying down debt is their sole focus. So they have specific processes to help you pay down debt, and you’ll have the same type of conversation no matter which NZHL consultant you work with.

In this article you’ll learn what NZHL can offer homeowners and investors, what their strategy is, and whether they are the right mortgage broker for you.

And if you have a question, write your questions or thoughts in the comments section below.

Who is NZHL?

New Zealand Home Loans (NZHL) is a large mortgage brokerage that is solely dedicated to helping Kiwis pay off their mortgages faster.

In a nutshell, they will rewrite your current loan and structure it to get you debt-free, faster. More on how that works in a moment.

The company was founded in 1996 by two Hamilton businessmen, John Erkkila and Murray Ferguson. Now, they have almost 300 staff across 72 offices around NZ.

The overarching business is 100%-owned by Kiwibank, but each individual office is franchised and run separately.

The fact that the business is owned by Kiwibank may impact your decision on whether to work with NZHL or not. More on this below.

NZ home loans vs other mortgage brokers. What’s the difference?

Most mortgage brokers out there focus on getting you more debt.

NZHL is different because it helps people manage the debt they already have.

They do this by setting borrowers up with a “smart home loan” structure, which when used correctly can save tens of thousands of dollars in interest and get you mortgage-free faster.

Again, any mortgage broker can do this for you. But because paying off debt is NZHL’s sole purpose and focus, that’s what makes it unique.

One other key difference – which is often a drawback for property investors – is the number of lenders NZHL works with. Many other brokers may work with 30+ lenders.

But NZHL only works with 5 or fewer lenders (more on why below).

So, with other brokers, if one bank says “no” there are many other lenders you could work with.

But with NZHL there are only a few lenders. This can make it harder to get approved in some cases.

This does narrow the chances for some potential clients as all applications still need to be approved by one of their lenders in the first instance.

How does NZHL get paid? how much does it cost?

It may be confusing for some homeowners and investors to hear that they still need to be approved for a loan if working with NZHL.

You might be thinking: If NZHL is there to help me pay off my current loan, why do I need to be approved for a new loan?

Yes, NZHL will restructure your current loan and help you pay it off. But to do so they need to move your mortgage to one of the lenders they work with.

They do this by raising a new loan with one of their lenders, and then pay off the mortgage you already have with your current bank/lender. Think of it as replacing one loan with another.

When they do this, they then earn a commission from one of their lenders. So they don’t charge you a fee to work with them. They get paid by the bank.

Kiwibank is one of the main lenders NZHL works with (but not the only one). This is because NZHL is wholly-owned by Kiwibank.

So, what is NZHL’s strategy for paying down debt?

Essentially, NZHL schools and guides homeowners and investors to make extra repayments against an existing mortgage to pay it off more quickly.

This concept on its own is not unique. But the way NZHL executes it is.

Here’s how it works:

1. They will encourage you to make additional repayments against your mortgage

2. They will then use “channelling”.

Making extra repayments doesn’t sound ‘sexy’, but is the most effective. Channelling sounds ‘sexy’, but is not as effective.

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Making extra repayments

You will not pay off your mortgage faster if you only make the minimum repayments the bank requires.

When you work with NZHL, you will put together a budget with your consultant. They will then work out how quickly you could pay off your mortgage if you put all the money left over towards your home loan.

You then make extra repayments against your mortgage. This will make an enormous difference.

For instance, if you had a $500k mortgage with a 4% interest rate, your minimum repayment would be $550 a week. You would pay your mortgage off in 30 years and pay $359,000 in interest.

But, if you decided to pay $650 a week, you would then pay off your mortgage in 22.4 years, and only pay $257,000 in interest.

You will then be mortgage-free 7.6 years earlier and have paid over $100k less to the bank in interest.

For some borrowers it may sound impossible to come up with the extra cash. That’s why you’ll put together a budget with your NZ Home Loans consultant.

“Channelling” / “smart home loan” structure

In NZHL’s ads you often hear about “channelling” or their “smart home loan structure.” But you might be wondering, “What is it?”

As well as moving your main mortgage to their lenders, they will also set you up with revolving credit.

Revolving credit is like a big overdraft secured against your home.

You then use this to place your extra repayments. You also move any other money you have (e.g. holiday savings or emergency funds) into the revolving credit.

This money then works like an extra repayment against your mortgage and saves you interest. But you can still take the money out at any time.

So if you move your holiday savings into the revolving credit, you’ll save on interest while they are there. Then, when it’s time to book your flights to Bali, you still have the money to do it.

So, it’s kinda like a smart savings account. You’re saving the interest you would otherwise pay. But, like a savings account, it only works if you are making the repayments.

There’s a bit more to it, and a few other strategies, but this is the fundamentals of how it works.

What software does NZHL use?

NZHL is also unique because it has built its own software to help you manage your mortgage. It’s called DebtNav.

It shows how much debt a person has, how much interest they will pay over there full mortgage term, and how much interest they will save by using NZHL’s faster pay down.

It tracks your income and spending and lets you know how long you will take to repay your home loan.

The results it gives can be quite incredible.

For instance, you can see in the below that this real NZ Home Loans client will save a whopping $130,776 in interest, simply by paying down their debt in 22 years instead of 30.

Although the software looks clunky and old, it’s still pretty powerful, because it pulls through your bank balances and you can see how you are tracking against your plan in real time.

Who is the right fit for NZHL?

NZ Home Loans works really well for people with 1-2 properties who want to pay off their mortgage faster.

It also works well for borrowers who need a bit of help. Sure, you could call up the bank or your current mortgage broker and decide to make extra repayments against your mortgage.

But, if you don’t feel comfortable with that, or you want to work with someone to help you set it up, they could be a great fit.

Who is NZHL the wrong fit for?

For investors with 2 rental properties or more, NZHL may not be the right fit for you. Why?

Because when you invest in property, you take on a lot of debt. Often it is a better idea to use the split-banking strategy.

This is where you use multiple banks and lenders to get your debt. Using multiple lenders will help protect your main home, give you more control over your money, and in some cases help you borrow more.

So, because NZHL only works with a few lenders, they are often not the right fit for ambitious investors. In that case, another mortgage broker may fit the bill. If you’re looking for recommendations, here is our list of the top mortgage brokers in NZ. And yes, NZHL is on there.

So should I use NZHL?

The strategies NZHL uses aren’t unique. Any broker can set up the same structure, just like you could yourself with a bank.

But their focus and process for helping you figure out if you can pay down debt is unique.

NZ Home Loans is absolutely the right fit for some borrowers. If you have 1 or 2 properties and your primary goal is to pay down debt, they can be fantastic.

Just be prepared to move your home loan to a different bank (in some cases), and to make extra repayments against your mortgage.

On the other hand if your primary concern is growing a portfolio of properties, they may not be the right fit, and another broker could fit the bill.

Write your questions or thoughts in the comments section below.