Retiring with a mortgage in NZ: pay it off first or keep investing?

If you reach retirement with a mortgage, paying it off with your savings is usually the better choice, as long as you keep a cash buffer. The reason is simple arithmetic: paying off a 6% mortgage is a certain 6% return, while the return our calculator and KiwiSaver statements assume after 65 is 2.5% a year after fees and tax. In our worked example, a couple with $100,000 owing at 65 could spend about $993 a week for life if they clear it straight away, against $977 if they keep repaying it over 10 years. Either way, the debt costs them: with no mortgage at all, their pay would be about $1,052. Rules checked 12 November 2026.

Why a mortgage matters more in retirement

While you are working, a mortgage payment comes out of wages that rise over time. In retirement, it comes out of NZ Super and savings, which are fixed. For a couple, NZ Super is $854.08 a week after tax at M from 1 April 2026. A repayment of $260 a week, which is what $100,000 over 10 years at 6% costs, would take almost a third of it.

People reach 65 with a mortgage for all sorts of reasons: buying later, refinancing for renovations, or helping children. None of that is a problem in itself. It just needs to be in the plan, because the usual retirement figures, including Massey University's spending guidelines, assume you own your home outright.

There are three common ways to handle it: clear it before you retire, clear it at retirement from KiwiSaver or other savings, or keep paying it for some years into retirement.

Worked example: $100,000 owing at 65

Our example couple are both 55, with $250,000 in KiwiSaver between them and $50,000 of other savings. They retire at 65 and plan for the money to last to 95. Suppose they will still owe $100,000 at 65. We ran three versions through the site's engine. Figures are what they could spend each week for life after tax, in today's dollars, on top of the mortgage costs:

Repaying over 10 years at 6% costs $13,587 a year, about $260 a week, or $135,868 in total: $35,868 of it interest. Paying off at 65 leaves them about $16 a week better off for life in 9 of 10 markets, and about $14 in a typical market.

With $150,000 owing, the gap is wider. Paying off at 65 gives about $964 a week; repaying over 10 years at 6% ($20,380 a year, $53,802 of interest) gives about $939, a difference of $25 a week.

A note on method: the repayments are fixed in dollars, so in today's dollars they shrink a little each year with inflation. We allowed for that. A lower mortgage rate narrows the gap; a higher one widens it.

What if your rate is lower or higher?

The 6% above is only an illustration. We ran the same $100,000, repaid over 10 years, at two other rates. The "pay it off" plan does not depend on the rate, so it stays at $993 a week.

Even at 4%, clearing the debt comes out ahead, by about $9 a week. That is because the return our calculator assumes after 65 is 2.5% after fees and tax, below all three rates. The higher the rate, the bigger the case for paying off. If you could reliably earn more after tax than your mortgage costs, keeping the loan would win, but in retirement few people can count on that.

Pay it off or keep investing?

The question is really which earns more: paying down debt, or leaving the money invested. Paying off a mortgage at 6% "earns" 6%, with no risk and no tax. To beat it by investing, your savings would need to earn more than 6% after fees and tax, every year, reliably.

For comparison, the Schedule 7A assumptions on KiwiSaver statements use 2.5% after fees and tax after 65. Before 65, they range from 1.5% for a defensive fund to 5.5% for an aggressive fund. Sorted's retirement calculator assumes 3.5% for a balanced fund. None of these beats a 6% mortgage, and all of them come with ups and downs.

Reasons you might still keep some debt:

• A cash buffer matters more. Do not empty every account to clear the mortgage. Keep enough in easy reach for a roof, a car or a health cost.
• Your rate is low. If you fixed at a low rate, the gap with investment returns is smaller. Look again when it rolls over.
• Your KiwiSaver is still locked. Before 65, KiwiSaver can generally only be withdrawn in limited cases, so the choice may be between waiting until 65 or using other savings. Our KiwiSaver at 65 guide covers access.

If you are still working, check one thing before making extra repayments: that each of you is getting the full KiwiSaver government contribution, 25 cents for each dollar you contribute up to $260.72 a year. That needs $1,042.86 a year of your own contributions, and a 25% top-up is hard to beat.

Clearing it before you retire

If you want to be mortgage-free at 65 without dipping into savings, the extra repayments have to come from your pay now. In our example, if the couple used $100,000 of savings to clear the mortgage at 65, they would need to save about $209 a week more from now until 65 to get back to the $1,052 they would have had without it. That is a measure of what the debt costs: roughly $209 a week for ten years, or $59 a week less for 30 years of retirement.

To see how extra repayments shorten your mortgage term, try our sister site, the mortgage repayment calculator. Then put what is left at 65 into our calculator as a one-off cost at your retirement age.

How to model your mortgage in our calculator

1. Open the retirement calculator and enter your household as usual.
2. Under "Spending by age, one-off costs and lump sums", add a one-off cost at your retirement age equal to what you will owe. That is the "pay it off" plan.
3. To compare keeping it, raise your weekly spending by the repayment for the years it lasts. The calculator holds spending level, so for a short mortgage this overstates the cost a little; the "pay it off" figure is exact.
4. Check the "very poor market" figure as well as the headline. Debt makes a plan less flexible when markets fall.

If your retirement involves renting rather than a mortgage, our renting in retirement guide shows how much bigger that cost can be. If your savings are thin but your home is valuable, our reverse mortgages guide covers borrowing against the home without repayments, which works in the opposite direction.

This is general information, not financial advice. Your lender can tell you about break fees and options for your loan.

Questions

Should I use my KiwiSaver to pay off my mortgage at 65?

Often yes, if your mortgage rate is higher than your savings earn after tax and you keep a cash buffer. In our example, clearing $100,000 at 65 left about $16 a week more for life than repaying it over 10 years at 6%.

Can I get NZ Super if I still have a mortgage?

Yes. NZ Super has no income or asset test for you, and a mortgage does not change it.

How much does a mortgage reduce my retirement income?

For our example couple, $100,000 owing at 65 cuts their weekly pay for life from about $1,052 to $993 if they pay it off, or $977 if they repay over 10 years at 6%.

What if my mortgage rate is low?

In our example, clearing $100,000 at 65 still beat repaying it over 10 years at 4%, by about $9 a week for life, because the return assumed after 65 is 2.5% after fees and tax.

Is it better to make extra repayments or contribute more to KiwiSaver?

First make sure you get the full KiwiSaver government contribution, which needs $1,042.86 a year of your own contributions. Beyond that, extra repayments earn your mortgage rate with no risk, which most funds struggle to beat after fees and tax.