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September 06 newsletter

One of the biggest hurdles to achieving some level of financial independence faced by the average New Zealander is paying off a mortgage. Reducing their mortgage is a very common goal of our clients, and so we make no apologies for making this topic a regular feature in our newsletters.

We have just completed another upgrade of the mortgage calculator. The additional feature that we have included is an option allowing you to compare two different scenarios, side by side.

With the new calculator at hand, we encourage you to run through some numbers, weigh up the available options, and see how you may be able to reduce the financial burden of your mortgage.

A starting example

Your new home costs $300,000. You have a $30,000 deposit and borrow $270,000 over 20 years at 8.0% interest. Monthly repayments on a table mortgage are $2,258. Total interest paid over the term of the loan is $272,103. Now, let's change some of those variables to see how much interest you can save.

Increase your deposit by $20,000

You now have a $50,000 deposit and only need to borrow $250,000 over 20 years at 8.0% interest. Monthly repayments are $2,091. Total interest paid over the term of the loan is $251,864. By increasing the deposit by $20,000, you have saved $20,239 in interest costs and you have an extra $167 each month.

Or, increase your payments

For example, if you were able to increase your monthly repayment by $200 in the original example, from $2,258 to $2,458 per month, you'd reduce the length of your mortgage by approximately 3 years and 6 months. This would result in a saving of $54,576 in interest costs.

Don't forget to consider some of our other tips and tricks.

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Or check out this mortgage calculator from interest.co.nz .