With last week’s interest rate rise, many of us feel the pinch. Those increased mortgage repayments make our cash flow feel tighter than ever.

So making extra repayments might not be at front of your mind. But here’s a secret weapon we often overlook: compound interest.

Making extra payments, even if they’re small, can turn compound interest in our favour, and chip away at the principal balance and significantly reduce the total interests you’ll pay over time.

Consider this: If you pay an extra $100 a month on a $1,000,000, 30-year mortgage with a 6% interest rate, you could reduce your loan term by roughly 3.5 years and save around $200,000 in interest!

In challenging times of high-interest rates, understanding the power of compound interest and the benefits of making extra payments can make a huge difference.

Quick Challenge: Can you divert an extra $25 a week towards your mortgage? Every bit helps!