Buying guide

Pay off your mortgage faster with these 20 tips

Paying your mortgage off faster could save you thousands of dollars. Here are our top tips to get you going.

Last updated: 9 February 2024

As of late 2023, the average home loan in New Zealand totalled almost $369,435, according to Canstar. Of course, if you’ve just bought your home your mortgage may be significantly more than that amount. The scary thing about a mortgage that size is that if you pay the minimum over a 30 year term, you’ll pay $550,499 in interest (assuming a 7.39% interest rate).

Luckily for all of us, there’s another option. Using these 20 tips for paying your mortgage off faster, you could save thousands of dollars of interest and become debt free years earlier.

Pay your mortgage off faster and save on interest

1. Make as many extra repayments as possible

When it comes down to it, the most effective way to pay your mortgage off faster is to simply make extra repayments. This is easier said than done, but every extra dollar you repay is a dollar you’re not paying interest on in the future.

Keep in mind that if you have a fixed rate mortgage there may be fees and charges for making extra repayments. You can get around this by paying less than your lender’s early repayment penalty threshold, choosing a variable rate, or making lump sum payments when your fixed terms run out.

2. Start extra repayments right away

Making extra repayments early in your home loan term will have a much larger impact on the total interest you pay and the time it takes to repay your home loan, than making extra repayments later. This is because when you pay extra in year one, you’re not paying interest on that amount for thirty years (as opposed to 20, 10, or five years if you were to make repayments later).

3. Review your mortgage at least once a year

Lenders make it easy to leave your mortgage on auto-pilot and refix your home loan without thinking via an app. But don’t fall into the trap - review your mortgage at least once a year and see if you can get a better rate, lower fees or more flexible terms elsewhere. A mortgage broker can help with this.

4. Put lump sums towards your mortgage

Let’s say you had a $400,000 mortgage with a 7.39% rate. If you paid an extra lump sum of just $20,000 in your first year you could save almost $30,000 in interest repayments over a 30 year term. That’s why, if you’re lucky enough to receive inheritances, lotto wins, bonuses at work or other lump sum payments it’s a great idea to put these towards your mortgage.

5. Switch to fortnightly repayments

If you halve your monthly repayment and make repayments fortnightly instead this will help you pay your mortgage off faster. Because if you do the maths, there are 12 months in a year, but there are 26 fortnights - meaning you’ll be paying the equivalent of an extra month’s repayments every year.

6. Keep your repayments the same when interest rates decrease

When interest rates decrease your repayments may decrease right away if you have a variable rate loan, or after you refix if you have a fixed rate. When this happens it’s a great idea to keep your repayments the same. That way the savings you would have made will instead go straight to reducing your principal and paying your loan off faster. 

7. Increase your repayments when your financial circumstances improve

If you get a pay rise at work, pay off your student loan, or your financial circumstances improve for any other reason, be wary of lifestyle creep. Your tastes and habits will quickly adjust to the new level of income and before long it won’t make any difference. A smarter alternative is to increase your mortgage repayments when your financial situation improves to pay your mortgage off faster.

It's a great idea to speak to your lender once a year minimum to review your mortgage.

8. Start repayments right away

Most lenders start your first repayment one month after settlement day. Instead, you could make your first repayment on settlement day and this will instantly reduce your principal and lower the total cost of your loan.

9. Automate the extra bit

Everyone knows that they should make extra mortgage repayments to pay their home loans off faster, but so many of us don’t do it. The fact is, life gets in the way of our good intentions. To avoid this and ensure you make extra repayments try setting up a regular automatic payment into your home loan account.

10. Give negotiating a go

Lenders can seem intimidating so asking them to waive fees or offer a better interest rate can be a little scary. But it’s worth a try. In fact, many lenders offer rates that are below their advertised rates so simply asking could save you serious money. A good mortgage broker can help with this.

11. Don’t ‘capitalise’ loan fees and purchase costs

So many home buyers just add their loan fees and purchase costs into their loans. This makes life easier at the time, but could cost you thousands of dollars in extra interest payments over the life of your loan.

12. Use a revolving credit or floating portion

Often the lowest interest rates are fixed. It makes sense to go for the lowest rate, but a fixed rate can limit the amount of extra repayments you’re able to make (or charge fees if you make repayments above a certain level).

To get around this problem you could either fix most of your loan and leave a smaller portion on a variable rate - or use a revolving credit facility. A revolving credit agreement essentially turns a portion of your mortgage into a big credit card. You’ll be able to make as many extra repayments as you like, then you'll be able to access those extra repayments if you need them (it is of course better to leave them be if possible!).

Making extra repayments in the first few years of your home loan can have a huge impact.

13. Avoid fees for switching lenders

If you sell your home or switch to a new lender, you may be charged break fees or be required to repay any cash incentives you received when you took out the loan. It’s always best to avoid encountering these fees by ensuring that your loan is portable and that you don’t need to sell your home before your fixed term ends.

14. Try an offset account

An offset account is a savings account that is linked to your mortgage. The nifty thing about these is that you’ll only pay interest on your mortgage principal, minus whatever amount is in your offset account. If you’ve got a lump sum of cash this could be a great way to get a guaranteed return on it by reducing interest costs, especially when interest rates are high.

15. Weigh costs and benefits when refinancing

Refinancing your home loan can be a great way to get a better deal, but be careful - nothing is free and there’s almost always a cost to refinancing. The key is to weigh the costs against the benefits every time you refinance to make sure you’re getting a better deal that will help you repay your home loan faster.

16. Don’t default to your bank

When you take out your home loan it’s easy to turn to the bank where you hold your everyday accounts. It’s also easy to default to one of the big four banks. But it’s worth looking outside of these lenders at smaller alternatives, some of whom may offer lower interest rates, more flexible terms and more competitive fee structures.

17. Find savings and put them towards your mortgage

Take a look at your spending - chances are you’ll be able to find expenses that aren’t necessary and can easily be cut. You may be paying for several streaming services when one will suffice, buying a coffee out, or fueling up at a more expensive petrol station because it’s more convenient. Whatever those unnecessary costs are, it's worth searching for them, cutting them and then increasing your mortgage repayments by that exact amount.

Your mortgage doesn't have to last for 30+ years.

16. Delete high interest debt

Repaying high interest debt first may be a great way to pay your mortgage off faster. That’s because high interest debt eats up your disposable income and reduces your ability to make extra mortgage repayments. It’s worth making an effort to repay this debt as soon as possible, starting with the loans with the highest interest rates and working backwards until you’re debt free (apart from your mortgage).

19. Reduce your mortgage term

Most mortgages are 30 years in New Zealand, but the fact is a shorter mortgage term could save you thousands of dollars in interest payments (not to mention the satisfaction of being debt-free earlier).

For example, a 30 year mortgage with a 7.39% rate will require monthly repayments of $2,767 and cost a total of $996,045. A 20 year loan with the same rate will only require repayments of $3,196 but it’ll cost over $200,000 less in total ($766,925).

The only problem with this approach is that you’re locked into making extra mortgage repayments (it’s not optional like it would be with a floating portion or a redraw facility) so you need to be certain that you can afford the higher repayments).

20. Make your mortgage a priority

We’ve all got a lot of stuff to worry about, so it’s easy to set your mortgage on autopilot and forget about it. By prioritising repaying your mortgage faster, setting goals, and spending a little time each year to review your mortgage and finances - you can pay yours off earlier and keep more of your money in your account, instead of the bank’s.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice.


Ben Tutty
Ben Tutty

Ben Tutty is a regular contributor for Trade Me and he's also contributed to Stuff and the Informed Investor. He's got 10+ years experience as both a journalist and website copywriter, specialising in real estate, finance and tourism. Ben lives in Wānaka with his partner and his best mate (Finnegan the whippet).