In: Mortgage Tips

Becoming mortgage-free is a significant life goal for many New Zealanders – and rightly so. With about 40 percent of new borrowers borrowing over five times their annual incomes, your home loan payments are probably one of your biggest bills.

In the face of this kind of debt, it can be tempting to opt for the longest term (and the smallest repayment amount) you can. But remember, paying off your mortgage faster can potentially save you thousands of dollars in interest costs. And you don’t need too much to get started.

Small extra, big impact

Even a small extra payment – and even smaller than you think – can make a huge difference to your loan over time.

You may not be able to spare an extra $100 or even $50 a week. But can you spare $10?
A $400,000 mortgage at 5 per cent over 25 years is $1079 a fortnight. Over the life of that mortgage, you would pay $300,880 of interest. It’s eye-watering stuff.

But if you increase your payment to $1099 a fortnight, or an extra $10 a week, you’d pay $288,588 in interest – saving more than $12,000 at current interest rates. Not a bad return from a relatively small investment, right?

Bumping up your extra repayment to an added $20 or $30 a week would make the savings even more dramatic. That $400,000 mortgage could be knocked off a full year earlier if you could put an extra $20 a week into repayments.

What’s the lesson in all this number-crunching?

Any extra money you can afford to put on your mortgage can leave you better off.

When you’re paying off a big debt, reducing the amount you owe doesn’t only save you money in interest this year; it has an effect on every year thereafter. Results can compound to big sums, even if the payment change is only small.

However, keep in mind that – if you have a fixed-rate mortgage – there might be limits or penalties involved for extra repayments. So check with a mortgage adviser to make sure this strategy is right for you.

We can help you structure your mortgage

Paying a little extra on a regular basis is just one way to pay off your mortgage faster. But it’s also important to tailor your mortgage to your needs, for example by adjusting the interest rate and term.

If you have your sights set on getting debt-free faster, our Mortgage Link advisers can help you along the way. Visit our website to find an adviser in your area.


To get in touch with the team at Mortgage Link, please contact:
Josh Bronkhorst
[email protected]
021 835 506


Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.