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8 tips for paying your mortgage off faster

Home ownership is a dream of many New Zealanders. Taking out a home loan is the first step to achieving this goal but until you pay back what you borrowed, your home ownership remains in partnership with the lending body.

Many people, dare we say most, find it easier to spend than save. Yet saving in the short term can free funds in the longer term. But in this age of instant gratification, we often lose sight of the long game.

Why pay off your home loan faster?

Living debt free is also a common aim. As your mortgage is most likely your biggest expense, it can really help your financial position if you are able to decrease this debt as quickly as possible.

Your home loan is made up of two components - principal and interest. The principal is the amount you borrowed and must pay back, and the interest is the amount the lender charges for lending you the money.

The longer you take to repay the principal, the more interest you will pay. Effectively the longer the term of the loan, the more it costs you. If you take out a loan with a repayment term of 30 years, but you pay it off faster, you can save a heap on interest.

Imagine what you could do with the additional cash each month. You could use the money for investments, home improvements, to travel to exotic destinations, or pursue other dreams.

Is it possible to pay off your home loan faster?


Before throwing more money at your mortgage, you need to be sure you understand how your mortgage works. Is it a fixed rate, floating rate or revolving credit loan? You need to know how flexible your mortgage is and be across the advantages and disadvantages of the different repayment structures.

Check too that you won't be penalised with an early repayment recovery for making additional payments.

Sit down with your partner and work out a budget to see if it is realistic to increase your repayments. Use a budgeting tool like this one on $orted. Whatever you decide, your budget needs to fit your lifestyle and your long-term financial goals.



How you can pay off your home loan faster

  • 1.Make repayments fortnightly rather than monthly. There are 26 fortnights in a year, which amounts to 13 months. By increasing the interval of payments this way, you pay an extra month without noticing it. If you have a $400,000, 30-year loan at 6% and made fortnightly rather than monthly repayments, you would save a considerable $98,000 in interest and repay the loan 6.5 years faster.
  • 2.Make lump sum payments. If you come into some money – tax return, salary bonus, or an inheritance – use it to pay off some of that principal.
  • 3.Don't lower repayments if interest rates fall.
  • 4.Round repayments up – if your repayment is $1278 per fortnight, round it up to $1300. That extra $22 will make a difference, yet you'll barely miss the $11 a week.
  • 5.Consider decreasing the mortgage term from 30 to 25 or 20 instead. Interest can be less on a shorter-term loan.
  • 6.Look at downsizing if your needs have changed over the years. Perhaps you don't need the room you have now and could sell your home to buy something smaller and more suitable.
  • 7.If you have the luxury of space, but don't want to move, another option is to let a room.
  • 8.Be sure to review your loan regularly. As life circumstances change, you might find that you are able to make savings by changing your home loan.
Where you can make savings

From 2015 to 2016, average weekly household expenditure increased by 17.1 percent ($190). While much of this went to housing and household utilities, some of it was used on unplanned purchases of discretionary items. And that's an area where we can control our spending.

If there's something you need, shop around for the best rate and buy only what you can afford. Also, think if you really need the latest mobile phone version or other such tech gadget.

Our bad habits – think alcohol, cigarettes, gambling – cost a bundle so changing those habits is a good place to make savings.

Food is another area where we can save a dollar or two. Unplanned eating out, convenience foods, and buying lunch are all areas where we can cut back and save.

How we can help

Our qualified home loan specialists can help you with mortgage reviews and can meet where and when it suits you.

Call or email Adam and Sudesh to discuss your home loan questions: adam@nzadvicegroup.co.nz or 0800 230 235.