Buying guide

6 ways to pay off your mortgage faster

These simple steps could save you thousands in interest.

21 April 2023

If you're a homeowner in New Zealand, you know that a mortgage is a long-term financial commitment. With most mortgages lasting for 25-30 years, it can seem like you'll be paying it off forever. The good news is, there are simple ways to pay it off early and save thousands of dollars in interest. And you know what the best part is? They require little sacrifice.

Here’s how you can pay your mortgage off faster:

  • Increase your payments
  • Pay fortnightly or weekly
  • Use lump sum payments
  • Refinance to a lower interest rate
  • Consider an offset account
  • Make lifestyle changes

6 steps to pay your mortgage off early

1. Increase your payments

One of the best ways to pay off your mortgage early is to increase your repayments. Even a small increase can make a big difference over the life of your loan.

Here’s an example of a $500,000 mortgage at an interest rate of 5% over 30 years. This shows the impact if this person were to round their loan repayment up to $3000 per month.

Loan amount: $500,000
Interest rateTermRepaymentsTotal to Pay*
5%5%30 years30 yearsMonthly: $2684Monthly: $2684$966,279 $966,279 
5%5%24 years24 yearsMonthly: $3000Monthly: $3000$855,426 $855,426 

* loan amount + interest

By paying an additional $316 per month, they've reduced the loan term by 6 years and saved $110,853.

2. Pay fortnightly or weekly

Instead of making monthly repayments, switch to fortnightly or weekly repayments. This will result in you paying off your loan faster because there are 52 weeks in a year, but only 12 months. By paying fortnightly, you'll make 26 repayments a year, which is the equivalent of 13 monthly repayments. This can shave years off your mortgage and save you thousands in interest.

Using the same example as above, this shows the difference between monthly and fortnightly repayments:

Loan amount: $500,000
Interest RateTermRepaymentsTotal to Pay
5%5%30 years30 yearsMonthly: $2684Monthly: $2684$966,279$966,279
5%5%26 years26 yearsFortnightly: $1342Fortnightly: $1342$880,495$880,495

That small change to fortnightly repayments has reduced the loan term by 4 years and saved $85,784.

Here’s what it could look like if they decided to make fortnightly repayments and top up the minimum repayments:

Loan amount: $500,000
Interest RateTermRepaymentsTotal to Pay
5%5%30 years30 yearsMonthly: $2684Monthly: $2684$966,279$966,279
5%5%21 years21 yearsFortnightly: $1500Fortnightly: $1500$799,881$799,881

Now they've managed to reduce their loan term by 9 years and save a whopping $166,398.

3. Use lump sum payments

If you receive a lump sum payment, such as a tax refund or bonus from work, consider using it to pay off your mortgage faster. Lump sum payments can make a big impact on your mortgage, reducing the amount of interest you pay and shortening your loan term. Just be sure to check with your lender first to make sure there are no penalties for making extra repayments.

4. Refinance to a lower interest rate

It pays to keep an eye on interest rates and shop around to see whether you could refinance to a lower rate. Even a small reduction can save you thousands over the life of your loan. Just be sure to factor in any fees associated with refinancing, such as exit fees from your current lender and application fees for a new loan. These fees will likely be higher when interest rates are falling than if they’re rising.

Bonus tip:

If you manage to reduce your interest rates, it may be tempting to reduce repayments. However, keeping them the same is going to have a huge impact on your ability to pay the loan off faster.

As an added bonus, if you pay more than the minimum on your mortgage, when interest rates go up, you won’t be hit as hard because you’ve been paying more than you needed to anyway.

Getting into good financial habits can pay off in the long term.

5. Consider an offset account

An offset account is a transaction account linked to your mortgage. The balance in your account is offset against your mortgage balance, reducing the amount of interest you pay. For example, if you have a $500,000 mortgage and $50,000 in your offset account, you'll only pay interest on $450,000. This can save you thousands in interest over your loan term.

6. Make lifestyle changes

While increasing your repayment amount or frequency is a great way to pay off your mortgage faster, it may not be feasible for everyone. If you can't afford to make extra repayments, consider making lifestyle changes to reduce your expenses. This could include cutting back on takeaways or cancelling subscriptions you don't use. Every little bit helps, and the money you save can go towards your mortgage repayments.

Final word

By following these tips, you can reduce your loan term and save thousands in interest, without sacrificing too much. Remember, the key is to be consistent and disciplined with your repayments. Set a goal for when you want to be mortgage-free, and work towards it every day. With dedication and hard work, you can achieve financial freedom and enjoy the benefits of a mortgage-free life.

Written with advice from:

  • Tom Hartmann, Sorted Personal Finance Lead
  • Bruce Patten, Loan Market


Karina Reardon
Karina Reardon

Head of Strategic Partnerships -

Karina has worked in the mortgage sector for the last two decades, and is considered an industry expert. As a content author she has a database of financial advisers who share her weekly commentary through their social and digital channels. A well-respected and popular member of the industry, Karina was recently recognised as one of the ‘Elite women in mortgages 2023’.