Should I Pay Down My Mortgage or Contribute to KiwiSaver?

This financial guide addresses a common New Zealand decision: allocating extra income between mortgage repayment and KiwiSaver contributions.

Key Financial Comparisons

• •Current mortgage rates average 5%
• •Growth KiwiSaver funds average 9.3% returns (6.69% after tax)
• •Long-term mortgage rates likely average 6-7% versus ~5.5% after-tax KiwiSaver returns

Primary Recommendations

Maintain KiwiSaver contributions to capture employer matching and government tax credits. For every dollar you contribute to KiwiSaver (up to $1,042.86 per year), the Government gives you 25 cents. That's a maximum of $260.72 free money every year, provided you earn under $180,000.

Strategic Considerations

The decision varies based on circumstances:

• •Homeowners benefit from eliminating non-deductible mortgage interest
• •Investment property owners may prioritize building equity for future leveraging
• •Those near retirement may prefer mortgage reduction over locked-away retirement funds

Optimal Approach

Rather than choosing exclusively one option, consider a balanced strategy: contribute sufficiently to capture employer benefits while directing surplus funds toward mortgage reduction or investment property equity building.