How Small Extra Repayments Save Big on Your Mortgage
From Aaron’s YouTube: “How $5/day extra effects your mortgage #newzealand #firsthome #kiwisaver ##nzfirsthome #nzmortgage”
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Posted 19 March 2024
The short version
- An extra $5/day ($35/week) on a $650k loan at 7% saves $112,000 interest over 30 years.
- Those same small payments also shorten your loan term by 3 years.
- Doubling to $10/day ($70/week) saves 5 years off your mortgage.
- At $100/week extra, you could save over $200,000 in interest.
The power of small, regular extra payments
Most people think you need big lump sums to make a dent in your mortgage, but Aaron's example shows how small, consistent payments add up. With a $650,000 loan (close to NZ's average) at a 7% interest rate, putting aside just $5 per day - roughly the cost of a coffee - saves you $112,000 over the full 30-year term.
What's surprising is how this tiny habit also changes your timeline. Those $5 daily payments don't just reduce interest - they'll have you mortgage-free three years earlier without any major lifestyle changes. The key is starting early and being consistent, since the savings compound most in the early years of your loan.
How doubling up accelerates your progress
Aaron demonstrates what happens when you scale up small savings. Doubling your extra payments to $10/day ($70/week) saves a full five years off your mortgage term. That's five fewer years of rate negotiations, bank fees, and interest payments - just by finding an extra $35 per week.
At $100 weekly (about $14/day), the savings jump to over $200,000. This shows how incremental increases to your repayment amount create disproportionately large benefits over time. For many households, these amounts can be found by reviewing regular subscriptions, discretionary spending, or small windfalls like tax refunds.
Making small payments work for you
The beauty of this strategy is its accessibility - you don't need a six-figure salary to benefit. Aaron's examples use amounts most people can adjust through minor budgeting changes, like bringing lunch from home or reducing convenience spending.
To implement this, set up an automatic transfer matching your daily goal (e.g., $35/week for $5/day). Most banks let you schedule additional payments alongside your regular repayments. Check your loan terms first - some fixed-rate loans have limits on extra repayments without penalties.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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