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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22969
Experience:  38 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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Is it better to pay the principle first on a mortgage loan

Customer Question

Is it better to pay the principle first on a mortgage loan or the interest or split it between the two and at what percentage?
Submitted: 2 years ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 2 years ago.
That depends on whether you want to pay the mortgage off earlier. If you are an investor you may not want to tie up your capital and repayments of the principal, because of course the payments of principal and not tax-deductible like the interest. If you are a homeowner, then you may want to pay off the principal as soon as you can. You need to make a judgment call as to how quickly you want to pay off the principal to adjust the principal and interest percentage, and of course adjust this in terms of your budget. There is no particular legal advantage either way. It also depends on whether the lender accepts payments of principal other than what they require. For example a bank will typically tell you how much principle you should be paying and spread this over the term of the mortgage. Some banks will let you pay off lump sums of principal as well