Windfall Allocation Calculator NZ 2026/27

Quick answer: On the worked example below, splitting $50,000.00 by ranked return delivers 8.13% in the first year, or $4,063.50, against $2,650.00 if it were all invested and $3,250.00 if it all went on the mortgage. The order that produces it is high-interest debt, then the emergency fund, then remaining debt, then the market.

A lump sum arrives and the advice splits into camps: pay off the mortgage, build a buffer, get it invested. All three are reasonable and none of them is a rule, because the right answer depends entirely on the rates involved and those differ for everyone. The useful reframing is that every destination for the money produces a return, and those returns can be ranked. Repaying a debt returns exactly its interest rate, and does so guaranteed and untaxed, because you are avoiding an expense rather than earning income. An investment produces a return that is neither guaranteed nor untaxed, so the honest comparison is against the figure left after fund fees and PIE tax rather than the headline one. Put on that basis, a mortgage at six and a half percent comfortably beats an investment expected to return seven percent gross, which surprises people and is simply arithmetic. This page ranks every option you enter and allocates the money accordingly. It places the emergency fund deliberately out of rate order, ahead of any debt cheaper than a credit card, because its purpose is not to earn anything: without a buffer the next unexpected expense goes straight back onto the highest-rate debt you have, undoing the repayment you just made. There is also room to take an amount off the top to actually enjoy, because a plan with nothing in it for you is the kind that gets abandoned, after which the whole windfall leaks into ordinary spending anyway.

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Updated  Current 2026/27 rates applied.
Verification & Methodology
Debt repayment returns the interest rate, guaranteed and untaxed, because avoiding an expense is not income. That is what makes it directly comparable with an investment return and usually superior to one.
Investment return = gross return − fund fee − PIE tax. A foreign shares PIE is taxed under the fair dividend rate on 5% of value at your PIR, which at 28% is 1.40% of the balance a year.
The allocation order is: anything set aside to spend, then debt at or above the high-interest threshold, then the emergency fund gap, then any remaining debt whose rate exceeds the net investment return, highest rate first, then the balance to investing.
The emergency fund is placed ahead of cheaper debt on purpose, because it prevents re-borrowing at the highest rate available. It earns the after-tax cash rate in the return calculation.
Money set aside to spend is excluded from the return and from the blended percentage, since it is not being allocated for a return.
Blended return = the sum of each allocation multiplied by its rate, divided by the amount actually allocated. It is a first-year figure and does not compound.
Excluded: any break fee or restriction on repaying a fixed-rate mortgage early, which can be material; mortgage offset accounts, which change where the emergency fund is best held; and the effect of repayments on loan terms.
First-year returns only. Debt repayment compounds by reducing interest for the life of the loan, so the long-run advantage of clearing debt is understated here rather than overstated.
Not financial advice. Last verified: .

Every Option Has A Return, So Rank Them

The argument about whether to repay debt or invest gets treated as a matter of philosophy. It is a matter of arithmetic, once both sides are put on the same basis.

Repaying a debt returns exactly its interest rate. It is guaranteed, and it is untaxed, because avoiding an expense is not income. An investment return is neither guaranteed nor untaxed.

On the worked example that gives a clean ranking: 19.95% on the card, 9.50% on the car loan, 6.50% on the mortgage, and 5.30% invested. Everything beats investing.

Worked Example: A $50,000 Windfall

$8,000.00 clears the credit card, returning 19.95%.

$15,000.00 fills the emergency fund to its $20,000.00 target.

$12,000.00 repays the car loan at 9.50%.

$15,000.00 goes against the mortgage at 6.50%.

First-year value $4,063.50, a blended 8.13%. Investing the lot would have returned $2,650.00, so the ranking is worth $1,413.50 in year one alone.

The Emergency Fund Breaks The Ranking On Purpose

On return alone the emergency fund would go last, since cash at 2.35% is beaten by every other option on the list.

It sits second because it is not there to earn anything. It is there so the next car repair or vet bill does not go onto the credit card you just cleared at 19.95%.

A plan that repays every debt and leaves nothing in reserve tends to rebuild the worst debt within a year, at which point the arithmetic that justified it has been undone. Our emergency fund calculator sizes the target, and our emergency fund placement calculator finds the least costly place to hold it.

Why The Mortgage Beats A 7% Investment

This is the comparison people most often get wrong, because the headline numbers point the other way: 7.00% invested against 6.50% on the mortgage.

The investment does not deliver 7.00%. After a 0.30% fund fee and PIE tax it nets 5.30%. The mortgage delivers its full 6.50%, because there is no tax on money you do not spend on interest.

So the real comparison is 5.30% against 6.50%, and the mortgage wins by 1.20 percentage points while also being certain. Our debt vs invest calculator works that specific trade-off in more depth.

Keep Some Of It

There is an input at the top for money set aside to spend, and it is there deliberately.

A windfall plan with nothing in it for the person who received the windfall is the kind that gets abandoned in week three, after which the entire sum drifts into ordinary spending and none of the ranking above happens at all.

A deliberate amount taken off the top, with the rest allocated properly, beats an accidental leak every time. The calculator excludes it from the return figures, because it is not there to earn anything.

What The First-Year Figure Understates

Every number on this page is a first-year return, which is the fair way to compare options on a like basis. It also understates debt repayment.

Paying $15,000.00 off a mortgage does not just save 6.50% once. It reduces the interest charged for the remaining life of the loan, and shortens the term. The saving compounds in a way the first-year figure does not show.

So where the calculation puts debt repayment ahead, the real margin is wider than it appears. Where it puts investing ahead, the margin is genuine but assumes the expected return actually arrives.

Before Acting On A Mortgage Repayment

Fixed-rate loans commonly restrict early repayment or charge a break cost, which can wipe out the advantage entirely for the fixed portion.

Many lenders allow a limited lump sum each year without penalty, and revolving or offset portions are usually unrestricted. Check what yours permits before allocating anything to it.

An offset account is also worth considering for the emergency fund portion, since money offsetting a mortgage saves the full mortgage rate untaxed while remaining available. Our mortgage offset calculator covers that.

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Frequently asked questions

What should I do with an inheritance or bonus?

Rank every option by the return it delivers. On the worked example a $50,000.00 windfall goes $8,000.00 to a credit card at 19.95%, $15,000.00 to top up the emergency fund, $12,000.00 to a car loan at 9.50% and $15,000.00 to the mortgage at 6.50%. That plan returns $4,063.50 in the first year, or 8.13%, against $2,650.00 if it were all invested.

Is repaying debt better than investing?

Wherever the debt rate is above your after-tax investment return, yes, and it is not close. Repaying a debt returns exactly its interest rate, guaranteed and untaxed. On the worked example the investment return after fees and PIE tax is 5.30%, so every debt listed beats it, including the mortgage at 6.50%.

Why does the emergency fund come before the mortgage?

Because its job is not to earn a return. Without a buffer, the next unexpected expense goes onto a credit card at 19.95%, which immediately undoes the repayment you just made. The emergency fund is what stops you re-borrowing at the worst rate available, so it sits ahead of any debt cheaper than that.

Should I just put it all on the mortgage?

It is a reasonable instinct and usually not the best result. On the worked example putting the whole $50,000.00 against the mortgage returns $3,250.00 in the first year, against $4,063.50 for the ranked plan. The difference is that the plan clears higher-rate debt first, and the mortgage is normally the cheapest debt anyone has.

How do I compare a debt rate with an investment return?

Put both on an after-tax basis. Repaying debt is untaxed, so a 6.50% mortgage returns a full 6.50%. An investment returning 7.00% gross pays a fund fee and PIE tax, netting 5.30% on the worked example. Comparing 7.00% against 6.50% gives the wrong answer; comparing 5.30% against 6.50% gives the right one.

Should I keep some of it to spend?

A deliberate amount is better than an accidental one. A plan with nothing in it for you is the kind people abandon, after which the whole windfall drifts into ordinary spending. Set the amount off the top, allocate what remains by return, and the decision stays intentional rather than becoming a slow leak.

What if the rates are close together?

Then the arithmetic is not really deciding it and the non-financial factors legitimately can. Debt repayment is certain while an investment return is not, which argues for debt where the rates are similar. Against that, money invested stays accessible while money paid off a mortgage generally does not without redrawing.

Can I always repay a mortgage early?

Not always without cost. Fixed-rate loans commonly restrict early repayment or charge a break fee, which can remove the advantage entirely for the fixed portion. Many lenders allow a limited lump sum each year without penalty, and revolving or offset portions are usually unrestricted. Check what your loan permits before allocating anything to it.