Confucius — ‘The man who moves a mountain begins by carrying away small stones.’
The amount owing on your mortgage may seem like an immovable mountain of debt. However you can start chipping away at it and begin to make rapid inroads into paying it off far faster and easier than what initially may seem possible.
If we look at a $350,000 mortgage there are some basic steps you can start taking to improve your financial position. The starting point, or default position, is just making the monthly repayments on a 30 year term – this will mean total interest paid is $488,281.
If you can afford around a $1 a week, rounding up to $5 a month, this simple measure will save you $4270. So some savings there, but not substantial. If you increase the $1 a week to a dollar a day, the savings become more meaningful, $24,338, or $811 per annum.
Increase this further to 10 dollars a week and savings are now $34,726, which is more than $1000 a year. If you buy a daily coffee, putting this money ($25 per week) into your mortgage, will save you $2550 a year. If you typically buy lunch at work putting this money, $50/wk, into your mortgage will save you over $100,000 in interest. The below table shows the savings from the extra money you can put in.
| Extra | Total Payments | Total Interest | Savings |
| $0 | $ 838,281 | $ 488,281 | $ – |
| $5/mth | $ 834,011 | $ 484,011 | $ 4,270 |
| $1/day | $ 813,943 | $ 463,943 | $ 24,338 |
| $10/week | $ 803,555 | $ 453,555 | $ 34,726 |
| $25/week | $ 761,735 | $ 411,735 | $ 76,546 |
| $50/week | $ 708,887 | $ 358,887 | $ 129,394 |
Being able to add just a little regularly to your mortgage will leave you in a far better financial position. As the above table shows, minor amounts will end up meaning significant savings.
The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.
