Taming the mortgage beast means treating it for what it is - your biggest financial commitment
Tuesday, 19 May 2026
Martin Hawes is a financial writer and presenter, and has written 25 personal finance books. He writes a weekly column.
OPINION: Some people may tell you that your first home is likely the single biggest financial commitment you will make in your life. In fact, this is not right; it is not the house purchase that is biggest, it is the mortgage.
When someone buys a house, they commit to the purchase price (let’s say $700,000). To settle the purchase of the house they provide $150,000 of their own money and borrow $550,000 at (say) 6%.
However, when you sign up for the mortgage you are promising to repay the capital that you have borrowed and, in addition, you are also promising to pay interest which at a 6% interest rate on $550,000 would be $636,000 over the course of the loan.
As the ink dries on the mortgage documents that you have just signed, you should realise that you have committed to paying the lender $1,186,000 over the next 30 years – a lot more than the purchase price of the house.
Read more:
Banks claim many borrowers are making extra repayments to get ahead on their home loans
Dollars and sense: How can I use a small inheritance to reduce my home loan?
I have little doubt that people put plenty of effort into considering houses, checking them out and negotiating for them. That is only sensible given the amount of money at stake.
However, people do not put the same effort into the mortgage to make savings on their cost of borrowing - even though there is more money at stake with the mortgage.
Right through the time you have a mortgage, the repayment of the mortgage should be your No.1 financial priority. Make mortgage repayment a project just as you did in finding the house and negotiating its purchase.
From the start you should understand the maths of mortgages, and know what factors are important so that you pay less. Go to the Sorted web site and have a play with their mortgage calculator.
Look at the total interest you will pay and see the ways it can be reduced. In particular, see what happens when you make higher monthly payments and/or find a lower interest rate (the time period will reduce as will the total interest that you will pay). Even relatively small changes can make great savings on the total interest that you will pay.
Your mortgage might be offered for 30 years but that does not mean that you ought to take that long. A basic rule of home loans is that you should pay as much as you can possibly afford; just because the bank’s standard term is 30 years does not mean that you should agree to it.
Instead, figure out the maximum you can afford and pay that – this will reduce the time to repay and save significant amounts of money.
Any spare cash that you have should be applied to the mortgage rather than invested. This means that any surplus that you have, or any lump sum that you might receive (work bonus, inheritance, the sale of something lying around in the attic) should go to the mortgage instead of being invested.
The only exceptions to this are your KiwiSaver contributions so that you get the employer and government contributions, and holding some emergency funds. Everything else should go into debt reduction.
The reason for this is that the mortgage cost might be 6% and it is hard to match that with investment returns after fees and tax. Even if you can beat that 6%, investment will have significant risk, whereas paying the mortgage has no risk.
If interest rates fall you may be offered lower repayments. You will be better off to leave the payments as they were if you can and shorten the time and total interest to be paid on the mortgage instead.
Do your best to get the lowest interest rate (there are lots of tables available online that show all the current rates making comparison easy). You will probably use fixed rates because they give certainty for a period but also because they are usually cheaper. Be aware that when a few years has passed and you have reduced the amount of the mortgage (and perhaps your house is more valuable) you may find that you are a safer bet for the bank and able to get a cheaper loan.
Do some work to save money on your mortgage. It is real money, and it should be your money.
Martin Hawes is not a financial adviser, and the information and opinions here should not be taken as financial advice.