Mortgage Lump Sum Calculator

Most NZ banks allow up to 5% of the original principal per year as a lump-sum payment without break fees, even on fixed rates. Some banks (e.g. Westpac Choices) are more flexible. Floating-rate loans allow unlimited extra payments. Always check your loan documentation before paying — break fees on a fixed loan can be thousands. Source: bank product disclosures.

Both work — but a lump sum has the biggest immediate effect because it reduces the interest-bearing balance starting from day one. A higher regular payment compounds the same effect over time. If you have a windfall (bonus, inheritance, tax refund), paying it as a lump sum saves more interest than spreading it over the year. Source: Sorted NZ.

Earlier is much better. A $20,000 lump sum on year 2 of a 25-year mortgage at 6.25% saves around $48,000 in interest. The same $20,000 in year 20 saves only ~$5,000 because most of the interest has already been paid. The 'interest curve' is front-loaded in NZ amortising mortgages — in year 1 of a 25-year loan, about 70% of each payment is interest; by year 20, it's 20%. If you have a fixed-rate loan, time the lump sum to coincide with the refix date to avoid break fees, OR use the 5%/year fixed-rate allowance most NZ banks provide. Source: Sorted NZ mortgage tool.

No — and this is a key difference from Australia and the US. NZ does NOT allow mortgage interest deduction on your owner-occupied home. So paying off your mortgage simply saves you the after-tax cost of the interest. (Rental properties had partial interest deductibility before being restored progressively from 2024 — 100% by 1 April 2026.) Comparison: $1 saved off your owner-occupier mortgage at 6.25% = $0.0625 of guaranteed return per year, tax-free. To match this in an investment, you'd need ~9.2% gross return at 33% tax rate. This makes mortgage payoff one of NZ's best 'investments' for owner-occupiers. Source: IRD + MoneyHub.