Table vs reducing loans: repayments and total interest compared

A table loan has one repayment that stays the same for the whole term; a reducing loan repays the same amount of principal every time, so the repayment starts high and falls steadily. On a $600,000 loan over 30 years at 5.06% (the average one-year fixed rate, rates as at 10 November 2026), the table loan is $3,242.97 a month throughout. The reducing loan starts at $4,196.67 and falls to $1,673.69 by the last month. Because it pays the loan down faster, the reducing loan costs about $110,802 less interest over 30 years ($456,665 against $567,467). Table loans are the New Zealand norm and reducing loans are now hard to find, but the comparison shows clearly what paying principal early is worth.

Two ways to shape a loan

Both kinds of loan charge the same interest rate on the balance you owe. The difference is how fast the balance comes down.

• Table loan. The repayment is fixed by the annuity formula so that it is the same every time and clears the loan at the end of the term. Early repayments are mostly interest; later ones are mostly principal. ASB describes table loans as "payments are spread out evenly over the full term of your loan". This is the standard home loan in New Zealand; our guide to how mortgage repayments work walks through one in detail.
• Reducing loan (also called straight-line). You repay an equal slice of principal every time: the loan divided by the number of repayments. On top of that you pay interest on whatever is still owing. ASB says that with a reducing loan "your regular repayment amount will be higher to begin with, but will steadily decrease over time". ASB lists its reducing loan as closed to new applications.

The maths for the reducing loan is simple. Principal each month = $600,000 / 360 = $1,666.67. Interest in month one = $600,000 x 5.06% / 12 = $2,530.00. So the first repayment is $4,196.67. Each month the balance falls by $1,666.67, so the interest falls by about $7.03 and so does the repayment.

Side by side: $600,000 over 30 years at 5.06%

The reducing loan's repayment drops below the table loan's at repayment 137, about 11 years and 5 months in. From then on it is the cheaper loan month to month.

All figures assume 5.06% for the full 30 years, repaid monthly. The table repayment is rounded up to the cent, with a slightly smaller final repayment.

Why the reducing loan costs less interest

The interest rate is identical, so the reducing loan does not get a better deal. It simply owes less, sooner. In year one it repays $20,000 of principal against the table loan's $8,757. After ten years it owes $400,000 against $488,932. Interest is charged on the balance, so a lower balance every month adds up to about $110,802 less interest over 30 years.

The flip side is cash flow. The reducing loan asks for $953.70 a month more at the start, which is $10,980 more in the first year, exactly when many households have the least room. The saving is the reward for paying more early.

You can get the same effect on a table loan by making extra repayments, and you keep the choice of when to stop. For example, adding $1,000 a month to the $3,242.97 table repayment from the start saves about $252,849 of interest and clears the loan in 18 years, at the same 5.06%. That is more than the reducing loan saves, because $4,242.97 every month repays principal even faster than the reducing loan does in its later years. On a fixed rate, extra repayments are capped by your bank's allowance; on floating they are not. Try amounts on our extra repayments calculator.

Who each suits

A table loan tends to suit

• Most owner-occupiers, especially in the early years when other costs are high. The repayment is predictable and the lowest it can be for the term.
• Anyone who wants to budget around a fixed figure for the length of a fixed term.
• People who want flexibility: a table loan plus voluntary extra repayments lets you speed up when you can and ease off when you cannot (back to the contracted repayment).

A reducing loan tends to suit

• People with plenty of income headroom now who expect less later, such as those planning to retire within the loan term.
• Borrowers who want the discipline of a built-in faster paydown rather than relying on themselves to make extra repayments.

In practice, with reducing loans now rare at the main banks, most people who want the reducing-loan result choose a table loan and add regular extra repayments, or use a revolving credit or offset facility for part of the loan. A shorter term is another way to pay less interest with a level repayment; see mortgage term length.

How to tell which kind of loan you have

If you are not sure what kind of loan you have, your statements or banking app will show it quickly:

• The repayment is the same every time and the balance falls slowly at first: a table loan. This is by far the most common.
• The repayment falls a little every time and the balance falls by the same amount each time: a reducing loan.
• The repayment covers only the interest and the balance does not move: an interest-only loan. See interest-only loans.
• There is a limit rather than a repayment, and the balance goes up and down with your income and spending: a revolving credit facility.

Many loans are split into parts, and each part can be a different type. A common set-up is one or more fixed table loan parts plus a floating revolving credit or offset part; see split loans. Your loan documents name each part's type and term.

What happens when rates change

Both loan shapes are recalculated when the rate changes. On a table loan, the bank works out a new level repayment on the balance and years left at the new rate (see how to refix). On a reducing loan, the principal slice stays the same and only the interest part changes with the rate.

Because a reducing loan's balance is lower at every point, a rate rise adds less interest in dollars than it would on a table loan of the same original size. That is a side effect of owing less, not a feature of the loan type.

This guide is general information, not financial advice. Rates as at 10 November 2026, the average of the five main banks' lowest advertised one-year fixed rates in the interest.co.nz table; check current rates on our mortgage rates page. Our repayment calculator shows a table loan's repayments and total interest for your own figures.

Questions people ask

What is the difference between a table loan and a reducing loan?

A table loan has the same repayment every time, mostly interest at first. A reducing loan repays the same principal every time plus interest on the balance, so it starts higher and falls. On $600,000 at 5.06% over 30 years, the table loan is $3,242.97 a month and the reducing loan starts at $4,196.67.

Which costs less interest?

The reducing loan, because it pays the balance down faster. On our example it costs $456,665 of interest against $567,467 for the table loan, a difference of about $110,802, at the same rate.

Can I still get a reducing loan in New Zealand?

They are now uncommon. ASB lists its reducing loan as closed to new applications. Ask your bank or a broker. Most people get the same effect by adding regular extra repayments to a table loan.

Why is the first reducing loan repayment so much higher?

Because it repays a full equal share of the principal from day one as well as the interest. On $600,000 over 30 years, that share is $1,666.67 a month, against $712.97 of principal in the first table loan repayment.

Is a reducing loan the same as paying extra on a table loan?

The effect is similar: both repay principal faster and cut interest. The difference is that a reducing loan's higher early repayments are compulsory, while extras on a table loan are voluntary and, on a fixed rate, capped by your bank's allowance.