Carmen Hall: Pay more on your mortgage if you can

Economic concerns are still rife despite more Kiwis being ahead on their mortgage. Photo / Getty Images

COMMENT:

It is pleasing to see in these tough economic times that a lot of people have been paying extra attention to their mortgages and are ahead with their payments.

No-one can deny the cost of living and inflation have stretched household budgets to the limit, and nowadays, every cent counts.

Westpac says 68 per cent of its home loan customers were ahead on mortgage repayments as of September, while more than 40 per cent of Kiwibank and BNZ customers and more than a third of ANZ customers had managed to do the same.

According to the banks, most of that progress was made when the interest rates hit historic lows and many chose to keep their repayments the same.

Now with rates spiralling upwards, I’m willing to bet those who made that decision are happy they didn’t blow the money on something else.

Financial experts say if you can afford to do it, paying off your mortgage faster or chipping away at it is a no-brainer.

Te Ara Ahunga Ora Retirement Commission personal finance lead Tom Hartman says borrowers only making minimum repayments on any debts leaves all the “power” with the lender.

The gains could be incredible, he says, and restructuring, increasing or making regular or lump sum payments could save borrowers tens of thousands of dollars in interest.

However, we are creatures of routine, Hartmann says, and because mortgages are spread over decades, often people stick with them without making any changes.

Even an extra $10 dollars a fortnight on your mortgage can make a difference.

I am fortunate to have a husband who believes in short-term pain for long-term gain.

I prefer to live in the moment, with an ‘I’ll worry about my old age when I get there’ attitude. He is frugal money-wise, while I am flamboyant.

But somehow we have made it work, and over the years my budgeting skills have improved. We talk and argue about our finances, but we agree that our mortgage is our main priority.

I understand not everyone is in our position, and we are lucky to have good jobs and the ability to pay a little more than we need to on our house.

That said, there are things I could easily spend that extra cash on, and our home is in dire need of a makeover. The dishwasher is on its last legs, and the cats have scratched up the lounge suite and curtains.

However, for the time being, those things can wait. In the words of Craigs Investment Partners investment director Mark Lister, if you are able, it is always better to pay off the mortgage as fast as possible.