Cash vs Mortgage Calculator NZ
This calculator helps you decide whether to buy a home with cash or keep a mortgage and invest the difference, one of the biggest money decisions facing New Zealanders who have enough savings to pay outright. Paying cash guarantees you avoid the mortgage interest on that amount, while keeping the mortgage and investing the same sum could grow faster if your returns beat the mortgage rate, though that upside is never certain. You enter the amount in question, your mortgage rate, your expected investment return after tax, and the number of years to compare over. The calculator works out the interest you would save by paying cash, based on an amortising loan at your rate, and sets it against the growth that amount could earn if invested instead at your assumed return. It shows both figures side by side along with a clear verdict on which option comes out ahead over the period on the numbers alone. Use it to test how sensitive the result is to your assumed return, since a small change can flip the outcome, because the mortgage saving is guaranteed but the investment return is not. Remember that being mortgage free carries value beyond the maths, including lower stress and a smaller income you need to get by. This is a simplified, indicative comparison only, not financial advice, so check your own figures before deciding.
A simplified comparison: interest saved on the balance versus growth on the invested amount. The mortgage saving is certain; the investment return is not. Being mortgage free has value beyond the numbers. Estimate only, not financial advice.
How it works
If you pay cash, you save the mortgage interest on that amount over the period, which the calculator works out at the mortgage rate. If you keep the mortgage and invest the cash instead, your money grows at the after-tax investment return over the same period. Comparing the interest saved with the investment growth shows which option leaves you ahead, holding everything else equal.
Worked example
On $400,000 over 10 years at 6.5%, an amortising mortgage costs about $145,030 in interest, so paying cash saves that amount. Investing the same $400,000 at a 5% after-tax return grows it by about $251,558 over the same period, so investing the cash while keeping the mortgage comes out ahead by around $106,000. If the investment return fell well below the mortgage rate, paying cash would win, but at these defaults keeping the mortgage and investing the difference wins on the numbers.
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