Revolving credit home loans: how they work and who they suit

A revolving credit home loan works like a large overdraft secured on your home. You get a credit limit, your pay goes straight in and reduces the balance, and you spend from it as you need to. Interest is calculated daily on what you owe and charged monthly, so money that sits in the account even for a few days saves interest. The catch is that there are no set repayments. In our worked example, $60,000 owing at 6.31% (the average advertised floating rate, as at 10 November 2026, used for illustration) costs $10.37 a day. Pay it down by $1,500 a month and it is gone in 3 years 10 months; never pay it down and it costs $3,786 a year, every year.

How revolving credit works

With an ordinary table loan you borrow a fixed sum and repay it with the same repayment every week, fortnight or month until it is gone (see how mortgage repayments work). Revolving credit is different. The banks describe it in similar terms:

• ASB says its Orbit home loan “is like an overdraft on a transaction account”, with a set credit limit you can redraw up to, a variable (floating) rate only, and no set loan term.
• ANZ describes its Flexible Home Loan as a revolving facility on your everyday account where you can borrow and repay freely “as long as you stay within your credit limit”.
• Kiwibank says “You get approved to borrow up to a certain amount, and this is your credit limit”, with no set repayments and a variable rate that “can change at any time”.

In practice your salary is paid into the revolving account, which pulls the balance down on payday. Bills, groceries and card payments come out of it, which pushes the balance back up. If more goes in than comes out each month, the balance falls over time and the loan is gradually repaid. If not, it stays where it is, or creeps up to the limit.

Most people do not put their whole mortgage on revolving credit. A common setup is a split loan: most of the debt on fixed rates, with a smaller revolving part for day-to-day cash flow. Kiwibank says you can put part of your mortgage on a revolving loan and the rest on fixed, variable or offset.

Interest is worked out every day

ASB says interest on Orbit is “calculated and accrued daily and charged monthly”, and Kiwibank says the same of its revolving loan. That means the bank multiplies each day’s closing balance by the yearly rate divided by 365, adds those daily amounts up, and charges the total to the loan once a month. (Our guide to how banks calculate interest covers the method in detail.)

Here is what that looks like on a $60,000 balance at 6.31%:

Because interest is daily, timing matters. Suppose $5,000 of take-home pay lands in the account and you spend it evenly over the month. On average about half of it, $2,500, sits against the loan, which saves around $12.97 in a 30-day month, or $157.75 over a year. If the whole $5,000 stayed put for a 30-day month, it would save $25.93. These are modest sums, which is the honest point: the daily effect helps, but what really pays off revolving credit is spending less than you earn, month after month.

Rates used here are for illustration only. Banks set their own revolving rates and our dated table does not list them; ANZ says its Flexible Home Loan “often has the highest interest rate and a monthly fee”. Check your bank’s revolving rate before you compare. Floating rates averaged 6.31% across the five largest banks, as at 10 November 2026.

Worked example: paying down $60,000

Say you have $60,000 on a revolving part of your loan at 6.31%. You leave your pay in the account and, after all spending, the balance falls by a set amount each month. Here is how long it takes to clear, and the interest along the way, assuming the rate stays the same:

For comparison, if the same $60,000 were part of an ordinary 30-year table loan at 6.31%, the repayment would be $371.78 a month and the interest over 30 years $73,835.33. Revolving credit can be far cheaper than that, if you drive the balance down. It can also be more expensive, because a balance that never falls just keeps costing interest.

A useful habit is to treat the revolving part as if it had a repayment. Pick a monthly amount, note the balance at the start of each month, and check that it has fallen by at least that much. Some people set a falling target, such as reducing the limit itself every year, so the room to redraw shrinks as the debt does. ASB offered a version of this, Orbit FastTrack, where “your maximum credit limit decreases fortnightly or monthly”, but it is now closed to new applications.

The discipline revolving credit needs

The banks are unusually blunt about who revolving credit suits:

• ASB: “If you aren’t confident in budgeting or actively managing your finances this loan is not suitable for you.”
• Kiwibank says it “won’t suit everybody” and suggests it if you are confident in your budgeting and won’t be tempted to max out the limit.
• ANZ says it could help people who are good at managing money, and notes it can ask you to repay the loan or reduce your credit limit at any time.

The risk is simple. The unused limit looks like spare money, and a holiday, a car or a renovation can quietly push the balance back up. Because there is no required repayment, nothing in the loan itself stops that. Signs it is not working include a balance that is the same or higher than a year ago, and regularly sitting near the limit.

Some practical guard rails:

• Keep the limit modest. A smaller revolving part, with the rest on table loans, limits the damage if spending drifts.
• Pay credit cards in full from the revolving account on the due date, so purchases sit in the cheaper revolving balance for as short a time as possible without adding card interest.
• Review the balance on the same day each month.
• Ask your bank to lower the limit as you pay it down.

Revolving credit or an offset loan?

Offset loans do a similar job in a different way. With an offset, your savings and everyday accounts stay separate but are linked to the loan, and interest is charged on the loan balance less the money in those accounts. With revolving credit, your money goes straight into the loan account itself. Both rely on keeping as much money against the debt as you can, both are floating, and both reward the same behaviour.

The practical differences are in the details: offset keeps your money visibly separate, which some people find easier to manage, and some banks let family members link accounts. Revolving credit can be simpler, with one account for everything. Not every bank offers both: ASB, for example, says it does not offer an offset account and points customers to Orbit instead. Our guide to offset mortgages lists which banks offer offset and works through an example.

Who revolving credit tends to suit

Revolving credit tends to work best for people who:

• earn more than they spend each month, reliably;
• have irregular income, such as bonuses, commission or self-employed earnings, and want somewhere to park lump sums without a break fee;
• are close to paying off the mortgage and want the last part flexible;
• already track their spending closely.

It tends to suit less well if you would rather the loan ran itself, if you want rate certainty (it is floating only), or if an unused limit would be a temptation. A fixed table loan with automatic extra repayments can achieve much the same result with less effort. Our guide to paying off your mortgage early compares the options side by side.

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

Questions people ask

Do I have to make repayments on revolving credit?

Not in the usual sense. Kiwibank says there are no set repayments, and ASB says Orbit has no set loan term. Interest is still charged every month, and the bank can review or reduce the limit, so in practice you need income going in to cover at least the interest.

Is revolving credit interest calculated daily?

Yes. ASB and Kiwibank both say interest is calculated daily and charged monthly. On $60,000 at 6.31% that is $10.37 a day.

Can I fix the rate on revolving credit?

No. Revolving credit is floating (variable) only. If you want some rate certainty, you can split the loan so most of it is fixed and only part is revolving.

Is revolving credit the same as an offset mortgage?

No, though they aim at the same thing. With revolving credit your money sits inside the loan account. With an offset, your accounts stay separate and their balances are subtracted from the loan before interest is charged.