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Mortgage Lump Sum Calculator

See how much interest you save and how many years earlier you pay off your NZ mortgage by making a one-off lump sum payment.

By Konstantin IakovlevPublished 28 March 2026Last reviewed
Data stays on your deviceSorted / FMA data

About this calculator

This calculator uses Sorted NZ mortgage repayment methodology. Reference: Standard amortisation formula. Last consulted 18 May 2026.

NZ lump-sum mortgage rules

Typical NZ bank fixed-rate terms 2026
  • •Fixed-rate lump-sum allowance: 5% of original principal/yr
  • •Floating lump-sum allowance: Unlimited
  • •Break fee on fixed (typical): $0–$20k+ (rate × balance × time)
  • •Most cost-effective lump sum: Refix anniversary or rollover
  • •Tax treatment: No GST or income tax on payments

Source: Sorted — Mortgage methodology

Disclaimer

This calculator provides estimates for general information purposes only. Results should not be relied upon as professional financial, tax, or legal advice. Tax rates and thresholds are based on publicly available IRD data and may change. Always consult a qualified tax agent or financial adviser for advice specific to your circumstances.

How lump-sum mortgage payments save interest

A lump sum reduces the interest-bearing principal immediately, compounding savings over the remaining term.

  1. 1

    Baseline scenario

    Baseline_interest = monthly_payment × n_months − principal

    Without any extra payments.

  2. 2

    Apply lump sum

    New_balance = principal − lump_sum

    Same monthly payment, smaller starting balance.

  3. 3

    Recalculate payoff months

    Months_new = ln(P ÷ (P − new_balance × r ÷ 12)) ÷ ln(1 + r ÷ 12)

    P is the monthly payment.

  4. 4

    Interest saved

    Saved = baseline_interest − new_interest

    Significant for early-term lump sums.

Worked example

Inputs: $450k loan @ 6.25% × 20yr, $20k lump sum

Result: Saves ~$46k interest, pays off ~1y 8mo earlier.

Frequently Asked Questions

Can I make extra lump-sum payments on a fixed NZ mortgage?
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.
Is a lump sum or higher regular payment better?
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.
When in my loan should I make a lump-sum payment for maximum savings?
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.
Are there tax benefits to paying off my NZ mortgage early?
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.

The mortgage lump sum calculator shows how much interest you save and how much earlier you become mortgage-free by making a one-off extra payment against a NZ home loan.

How this calculator works

A lump sum goes entirely against principal, so every future month's interest is charged on a smaller balance — the savings compound silently for the rest of the loan. The calculator amortises your loan twice: once as-is, and once with the balance reduced by the lump sum while keeping the same monthly repayment. Because the repayment stays constant against a smaller balance, the loan finishes months or years earlier, and the interest saved is the difference between the two schedules. Timing matters: the earlier in the loan you pay, the larger the multiplier — mid-single-digit multiples of the lump sum are common on long terms. Watch the bank rules: on fixed-rate loans most NZ banks allow only about 5% of the original principal per year in extra payments without break fees, while floating loans are unlimited — the cheapest window is usually the refix date.

NZ lump-sum payment rules

Fixed-rate extra payment allowance~5% of original principal per year (typical)
Floating-rate extra paymentsUnlimited
Break fee on fixed loansCan range $0 to $20,000+ — ask first
Cheapest time to pay a lump sumAt the refix / rollover date
Tax on the interest savedNone — it is a tax-free return

Worked Examples

$450,000 loan at 6.25% over 20 years, with a $20,000 lump sum

Saves ≈ $46,000 in interest and clears the loan about 1 year 8 months early.

  1. Monthly repayment: ≈ $3,289
  2. Baseline total interest: ≈ $339,400
  3. After the $20,000 lump sum, the same repayment clears the loan in ≈ 220 months instead of 240
  4. New total interest: ≈ $293,300 → saving ≈ $46,000 (2.3× the lump sum)

$600,000 loan at 6.25% over 25 years, with a $30,000 lump sum in year one

Saves ≈ $100,000 in interest and finishes about 2 years 9 months early.

  1. Monthly repayment: ≈ $3,958
  2. Baseline total interest: ≈ $587,400
  3. With the balance cut to $570,000, the loan clears in ≈ 267 months instead of 300
  4. Interest saved: ≈ $100,000 — 3.4× the lump sum, because the term is long

Built and maintained by Konstantin Iakovlev. Data sourced from the IRD and official New Zealand government sources.

Last reviewed:

Official Sources

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