Useful tips to pay down your mortgage faster

Congratulations, you’re a homeowner! 

Just getting on the property ladder is a huge and hard-earned step, and it can be an incredible feeling walking into your very own home for the first time in your life. Lately, it’s been a real challenge for Kiwis to take this step, with 90% of first home buyers saying they feel locked out of the property market. 

For those who manage it, once the housewarming party is over and the final box is unpacked (but not before you finally get the hang of all the light switches), it becomes a question of paying down the mortgage. And for many, the goal is to get it paid off as quickly as possible.

Aside from the sweet, glorious feeling of owning your own home outright, there are plenty of other reasons to pay it off. 

The benefits of paying off your mortgage faster 

Rising interest rates 

The first reason has at least one thing in common with Brad Pitt – that it needs no introduction. That’s because the first reason is increasing interest rates, and any potential home buyer and current homeowner knows all too well how they’ve increased from the record lows of the pandemic. 

In late 2022, the Reserve Bank of New Zealand increased the Official Cash Rate from 3.5% to 4.25%. Mortgage rates from banks across the country soon followed, which means that as fixed mortgages come up for renewal over the coming months, more homeowners will be paying off their loans at higher rates. 

As a result, if you can find any way of paying down your principal loan sooner, it can mean paying less interest while the rates remain high. 

More time to focus on saving for retirement 

It might not seem like a major incentive right now, but as any retiree will tell you, the more you can set aside while you’re working, the more freedom you should have once you retire. 

Some Kiwis put enough aside to retire early, whereas others have big plans to travel the world once they clock out of a job for the final time. 

No matter what your retirement plans are, the sooner you pay off your mortgage, the sooner you may be able to start setting more cash aside for retiring. Because instead of putting all that money into paying off the mortgage, you can put it into other areas, such as your retirement fund.

More money in your pocket in the long run 

Finally, paying off your mortgage sooner can result in more money in your pocket – and less going to the bank – in the long run. 

The sooner you pay it off, the less time you’re paying interest, and therefore the less you’re paying overall. 

Ideas for paying off your mortgage faster 

Increasing repayment amounts 

One way to pay off your mortgage faster is to increase your repayment amounts. Even if it’s just $20 or $50 per payment, that can quickly add up over the space of a year. And as many mortgages are for 30 year terms, little payments can add up over time and make a real difference to your mortgage overall. 

Of course, you can also make a small increase now, but you could also make another increase later if you receive a pay rise at work or finish paying off another loan. 

Switching from monthly to fortnightly payments 

One of the ways to reduce how much interest you pay on your mortgage is by switching from monthly to fortnightly payments. 

By paying more often, you end up making one or two extra payments per year. As a result, you can end up paying thousands less in interest over the lifetime of the loan.

Importantly, the higher the interest rates are, the more you can stand to save by paying more often. A mortgage calculator might provide an indication on the difference that fortnightly payments could have on your loan.

For the 44% of Kiwis who feel that paying off their mortgage is creating stress and anxiety, this could be a simple but effective way to help bring down their interest payments without making any major changes to their spending. 

Refinancing your mortgage

When you first get a mortgage, you may spend a lot of time working to find the best interest rates and the best deals, researching rates with different banks and financial institutions across the country. 

Once you have your mortgage locked in, it can be easy to fall into the trap of thinking you’re stuck with that bank and whatever interest rates they offer each time your fixed rate comes up for renewal.

However, when your fixed rate mortgage comes up for renewal, or if you’re struggling with floating interest rates, it can pay to shop around. 

You may be able to find a better deal at another bank, and therefore be able to lock in a lower interest rate or enjoy a lower floating rate than your initial lender. If you do so, you can also aim to continue making payments as if you were still on the higher rate, which may allow you to pay it off even faster. 

Be sure to consider if there are any fees or costs associated with moving your mortgage to a new lender and weigh those against any potential savings before making any decisions. 

Make lump sum payments 

Finally, lump sum payments can be another way to pay down your mortgage faster. 

Easier said than done of course, as it takes lump sums of cash to make it happen. 

However, whether it’s a work bonus, an inheritance, selling off some things from around home, or simply the result of putting extra money aside each week, those lump sums could make a real difference to your loan. 

Making sure payments are covered in case of an emergency 

Servicing a mortgage is no piece of cake, and should something go wrong, it certainly doesn’t make things easier. Consider how the mortgage will be paid if something goes wrong.

One option is to consider a life insurance policy. Life insurance policies can provide a lump sum payment if you were to pass away and may also provide the ability to add optional cover for serious illnesses and permanent disabilities. In this way, you or your family could receive a payout that can help to cover mortgage repayments should the worst occur. Easy as!


This article is provided for general information purposes only, does not consider your objectives, financial situation or needs and shouldn’t be considered or relied upon as professional advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.