Mortgage term length: 30 years vs 25 years, and shorter

The term is how long your loan is set up to run. A longer term lowers each repayment but costs much more interest, because you owe the money for longer. On a $500,000 loan at 5.06% (the average advertised one-year fixed rate, as at 10 November 2026), a 30-year term means repayments of $2,702.48 a month and $472,887 of interest. Cut it to 25 years and the repayment rises by $237.98 to $2,940.46, while total interest falls by $90,751 to $382,135. At 20 years you would pay $3,316.38 a month and $295,929 of interest. There is also a middle path: keep the longer term on paper and pay more when you can.

What the term does

Most New Zealand home loans are table loans: the same repayment every week, fortnight or month, worked out so the loan is exactly repaid at the end of the term. ASB, for example, offers table loan terms from 6 months to 30 years.

The term changes two things at once. It spreads the debt over more or fewer repayments, which sets the repayment size, and it decides how long the balance stays high, which sets the total interest. Early in a table loan most of each repayment is interest, so a longer term means more years of mostly-interest repayments. Our guide to how mortgage repayments work explains the formula.

The term is separate from your fixed rate period. You might have a 30-year loan with a two-year fixed rate; when the fixed rate ends, you refix for the remaining 28 years.

Repayments and total interest by term

$500,000 at 5.06% (average one-year fixed, as at 10 November 2026), assuming the rate stays the same for the whole term:

At a higher rate the gap widens. At 6.31% (the average floating rate, as at 10 November 2026), the same loan costs:

Two things stand out. First, each five years you cut adds less to the repayment than you might expect at the long end (30 to 25 years adds $237.98 a month at 5.06%) but much more at the short end (15 to 10 years adds $1,348.34). Second, the interest saving per five years is large all the way down. Rates will not stay fixed for decades, so treat these as comparisons, not forecasts.

25 years vs 30 years in detail

This is the choice most people face. On $500,000 at 5.06%:

The extra $237.98 a month on the 25-year term goes straight to the principal. After ten years you owe about $37,000 less, which matters if rates are higher when you refix or if you want to sell, borrow again or retire with less debt.

The 30-year term’s advantage is breathing room. A lower required repayment gives you a buffer if income falls, costs rise or rates climb, and our mortgage hardship guide explains that extending the term is one of the main ways banks help borrowers who are struggling. The term you choose can also affect how much a bank will lend, because banks test whether you can afford the repayments; that is a borrowing question rather than a repayment one.

Higher rates make the term matter more

The interest cost of a long term grows with the rate. At 5.06%, moving from 30 to 25 years on $500,000 adds $237.98 a month and saves $90,751 of interest. At 6.31%, the same move adds $218.79 a month and saves $120,248. The higher the rate, the smaller the extra repayment needed to shorten the term, relative to the interest it saves.

That matters because your rate will change many times over a 25 or 30-year loan. A term chosen when rates are low can end up costing much more if rates are higher for long stretches. It is worth reviewing your term at each refix for this reason.

Questions to help you choose

There is no right term for everyone. These questions can help:

• How secure is your income? If it could fall, through redundancy, parental leave, illness or self-employment, a longer term with a lower required repayment gives you a safety margin.
• When do you want to be mortgage-free? If you want the loan gone before you stop working, count back from that date. A 30-year loan taken out at 40 runs to 70.
• Do you have other goals? Money paid into a mortgage is hard to get back out. If you are also saving for children’s education, retirement or a buffer, a slightly longer term can leave room for those.
• Will you actually pay extra? A longer term with voluntary extras is only cheaper if you keep making them. If you know you will not, a shorter term does the discipline for you.
• Is your loan split? Ask your bank whether parts can run over different terms, so a smaller part can be paid off faster.

The flexible approach: long term, higher repayments

You do not have to pick one or the other. Many people take a 30-year term and set their repayments at the 25-year level. If the loan stays at 5.06% and you pay $2,940.46 a month instead of $2,702.48, a 30-year loan finishes in exactly 25 years with $382,135 of interest: the same result as a 25-year term. The difference is that if money gets tight you can drop back to the lower required repayment without asking the bank to restructure the loan.

The catch is fixed-rate limits. During a fixed term, banks cap how much extra you can pay without a break fee:

• ANZ: increase regular repayments by up to $250 a week, plus one lump sum a year of up to 5% of the loan.
• BNZ: up to an extra 5% of the loan balance each year.
• Kiwibank: up to 5% of the loan amount at the start of the fixed term in any year.

(Bank pages accessed 10 November 2026; ASB’s and Westpac’s limits were not confirmed.) An extra $237.98 a month is about $2,856 a year, well inside all three limits on a $500,000 loan. Floating loans have no limit. The other downside is behavioural: a voluntary extra is easy to stop. Setting it up as an automatic payment helps. See extra repayments and paying off your mortgage early.

Changing the term later

Your term is not locked for life. When a fixed rate ends you can ask to shorten the remaining term so the bank sets a higher required repayment, or lengthen it (subject to the bank’s lending criteria) to lower the repayment. Either way, the new repayment is the standard annuity on your remaining balance over the new remaining term at the new rate, the same maths our fixed vs floating calculator uses.

A practical approach many people use is to review the term at each refix. If your income has risen, shortening by a few years locks in faster progress. If the new rate is much higher, keeping the same end date and accepting a higher repayment is the way to avoid paying for longer.

To see repayments for other loan sizes at both 25 and 30 years, see mortgage repayments by loan size, or enter your own figures in our repayment calculator.

This is general information, not financial advice. Rates as at 10 November 2026.

Questions people ask

How much do I save with a 25-year mortgage instead of 30?

On $500,000 at 5.06%, the repayment rises from $2,702.48 to $2,940.46 a month ($237.98 more) and total interest falls from $472,887 to $382,135, a saving of $90,751, if the rate stayed the same.

What is the longest mortgage term I can get?

It depends on the bank and your circumstances. ASB, for example, offers table loan terms from 6 months to 30 years. Ask your bank what it offers you.

Is it better to take 30 years and pay extra?

It gives you flexibility. Paying the 25-year repayment on a 30-year loan produces the same result if you keep it up, and you can fall back to the lower repayment if needed. During a fixed term, stay within your bank’s extra repayment allowance to avoid a break fee.

Can I shorten my mortgage term later?

You can ask, and a fixed rate ending is a natural time to do it. The bank recalculates your repayment over the new, shorter remaining term.