Mortgage interest can take a big bite out of your budget—but with the right strategies, Kiwis can save thousands over the life of a loan. Here are practical ways to reduce the interest you pay and pay off your mortgage faster.
1. Make Extra Repayments
Even small extra repayments can make a big difference over time. For example:
- Paying an extra $50–$100 per week can shorten your mortgage term by years.
- Ensure your loan allows extra payments without penalties.
2. Switch to a Lower-Interest Mortgage
Interest rates can vary significantly between lenders. Consider:
- Comparing rates regularly to see if you could refinance.
- Using a mortgage broker to find competitive deals.
3. Choose a Shorter Loan Term
A shorter loan term usually comes with lower interest rates. While your repayments may be higher:
- You pay less interest overall.
- You own your home sooner.
4. Make Weekly or Fortnightly Payments
Instead of paying monthly:
- Weekly or fortnightly payments mean you make 26–52 smaller payments per year instead of 12.
- Extra payments go toward reducing your principal, cutting interest faster.
5. Round Up Your Repayments
Rounding up your repayments is simple but effective:
- For example, if your weekly repayment is $685, round it up to $700.
- That extra $15/week goes directly toward your principal.
6. Use an Offset Account
Some mortgages allow an offset account linked to your loan:
- Your savings reduce the interest you pay on your mortgage.
- For example, $10,000 in an offset account can reduce your interest charges as if your loan is $10,000 smaller.
7. Avoid Interest-Only Loans for Long-Term
Interest-only loans may seem attractive at first, but:
- You’re only paying interest, not reducing the principal.
- Switching to principal-and-interest repayments sooner saves you money in the long run.
Bonus Tip: Track Your Progress
Use online mortgage calculators to see how much you could save by:
- Making extra repayments
- Switching repayment frequency
- Refinancing to a lower rate
Monitoring your mortgage regularly helps you make informed decisions and motivates you to stick to your plan.
Final Thought:
Even small changes can save Kiwis thousands in interest over the life of a mortgage. Start with one strategy and build from there—your future self will thank you!