One of the key assumptions of most retirement plans is that you are mortgage-free and own your home outright, but thanks to high interest rates and higher prices, that’s becoming less common.

In fact, one in five Kiwis are managing a mortgage into retirement, according to Centrix.

To help you get debt-free earlier and plan that lush retirement you deserve we had a chat with John Bolton, Founder of Squirrel, one of New Zealand’s largest mortgage brokers (a man who knows a thing or two about paying off a home loan).

1. Eat your mortgage in bite-sized chunks

Having a gigantic mortgage can feel quite demotivating. So, John says splitting it up is a good idea.

“Break your mortgage down into smaller goals that you can shoot for short term. Goals that are aggressive but achievable with some changes to your spending and lifestyle,” he says.

Having something more immediate to work towards can be very motivating and the sacrifices might be easier than you’d think.

2. Use life milestones as a chance to boost repayments

If you don’t have the spare cash right now, that’s fine. But John reckons it’s a good idea to increase your repayments when life changes and your expenses decrease, if that’s your goal. For example, when your kids leave home.

“Your expenses will drop. Rather than just letting your spending expand to absorb that extra income, putting it towards your mortgage repayments instead will make a big difference.”

He adds that you can usually increase your regular repayments by as much as 30 per cent at any time without incurring break fees, even during your fixed term.

3. Stick with high repayments when rates drop

Fixed interest rates are sitting up around 7 per cent right now, but they won’t be there forever. When they drop, keeping your repayments at (or near) the same level can make a difference.

“That extra portion will be going straight towards paying off your loan principal, so it’s a great way to chip away at your mortgage faster.”

4. Leverage equity in your home to buy investment property

Taking on more debt to become debt-free may sound counter-intuitive, but hear us out. John says that if you’ve been in your home for a while you may have built up equity which you can leverage to buy investments.

“Over the medium term, you’ll build up capital gains. Then, when you get to retirement, you can either sell those properties to become debt-free or keep them as a source of passive income.”

5. Think about how much of your overall wealth is tied up in your home

People often stay in the big family home for years after the kids have flown the nest, but that could be a missed opportunity.

“Downsizing could not only leave you mortgage-free but maybe even with funds left over to invest elsewhere and build passive income to support your retirement.

“But there’s a real opportunity cost to having so much wealth tied up in an owner-occupied property for all those years, when it could be working harder for you elsewhere – so look at it sooner rather than later.”