Paying down the mortgage

This is NOT intended to be financial advice, and is intended to be general opinions of mine. Talk to a financial advisor / your mortgage broker / bank for personalized and professional advice.

Fixed vs Floating vs Revolving

Coming soon...

30 Years is wildly inaccurate

There's this phenomenon of a 30 year mortgage, which is wildly inaccurate. In New Zealand, 30 years is the longest time you can have lending for with minimum repayments, assuming nothing else changes. Do not be put off by the length or duration, and remember your mortgage term is purely based on how much of it you pay down, and how frequently you do so.

Pay down at re-fix

You can pay down any amount of the mortgage at point of re-fix. This means if you have a $1M mortgage split across 700K for 1 year, and 300K for 6 months, in 6 months time, you're eligible to pay down all 300K if you wanted to. This can be handy if you know you're getting a windfall in the next 2-5 years that can contribute to the mortgage.

You can pay down at any time in rising interest rates with no penalty

When you sign the mortgage, you would have read a bunch of words around break fees, calculations, and penalties for trying to pay the mortgage faster during the term. This is incorrect, and some banks (e.g. ANZ) allow you to pay up to 5% of the principal during the term, once, with no penalty.

Further, you can also make a lump sum payment beyond this, to any amount, at any time subject to penalty interest rates. Where it gets interesting is if interest rates have risen significantly beyond what you've fixed at, the bank's calculations will show there's no penalty or break fees. This can be incredibly beneficial for you as you can basically pay down your mortgage if you have extra savings at any time, at no cost. Of-course in a downwards interest rate environment, you really need to do the math, and it generally won't be in your favour - better to wait till refix in many cases.