How to Pay Off Your Home Loan Faster

Most borrowers stick with the minimum repayment for the entire life of their loan, but even modest increases in how much you put toward the principal each month can cut years off your mortgage term.

Making Extra Repayments Without Changing Your Loan Structure

Extra repayments reduce the outstanding principal, which means less interest compounds over the life of the loan. A borrower with a variable rate loan repaying an extra $200 per fortnight will reduce both the total interest paid and the loan term, though the exact saving depends on the rate at the time and the remaining balance. Most variable rate loans allow unlimited additional repayments at no cost. Fixed rate loans may allow limited extra repayments, often capped at $10,000 to $30,000 per year depending on the lender, with break costs applying if you exceed that limit. Before committing to a fixed rate term, confirm the extra repayment allowance if you expect to have surplus income available during that period.

Consider a borrower on a variable rate who receives an annual bonus or tax refund. Putting that lump sum directly onto the loan reduces the principal immediately and cuts the interest that would otherwise accrue on that amount for the remainder of the term. You can make lump sum payments as frequently as you like on most variable products, and the reduction in interest begins the day the payment is processed.

Using an Offset Account to Reduce Interest Without Locking Funds Away

An offset account is a transaction account linked to your home loan. The balance in the offset account is subtracted from your loan balance before interest is calculated, so a $20,000 balance in your offset reduces the amount of interest charged as though you had paid $20,000 off the loan. The difference is that your funds remain accessible. If you need the $20,000 for an emergency or an opportunity, you can withdraw it without applying for a redraw or waiting for lender approval.

Offset accounts are typically available on variable rate home loans, though some lenders offer partial offset on fixed rate products. A full offset provides a dollar-for-dollar reduction in the interest calculation, while a partial offset may only offset a percentage of the balance, such as 40% or 60%. Check whether the offset offered is full or partial before committing to a product, particularly if you plan to keep significant savings in the account.

In our experience, borrowers who use offset accounts as their primary transaction account, directing salary and other income into the offset rather than a separate savings account, see the most benefit. Even if the balance fluctuates throughout the month as expenses are paid, the average daily balance over the month still reduces the interest charged during that period.

Switching From Monthly to Fortnightly Repayments

Paying half your monthly repayment every fortnight instead of the full amount once a month results in 26 fortnightly payments per year, which equals 13 monthly payments instead of 12. You are making one extra monthly payment per year without changing your budget significantly. The additional payment goes directly toward reducing the principal, which accelerates the repayment timeline and reduces total interest.

Most lenders allow you to change your repayment frequency at any time by contacting them or adjusting the payment schedule in your online banking portal. Switching from monthly to fortnightly repayments does not require a formal loan variation or any fees in most cases. If you are paid fortnightly, aligning your loan repayment to your pay cycle also makes budgeting more predictable.

Reviewing Your Loan Structure and Rate Every Few Years

Interest rates, lender policies, and your own financial position all shift over time. A rate that was competitive three years ago may no longer be, and a loan structure that suited your circumstances when you bought may not suit them now. Refinancing to a lower rate can reduce your monthly repayment, but if you maintain your original repayment amount after refinancing, the difference goes toward the principal and shortens the loan term.

A loan health check every two to three years gives you a clear picture of whether your current loan still works for your situation. If your lender has increased rates without offering you a discount, or if your loan no longer includes features like offset or redraw that you now need, it may be worth reviewing your options. In some cases, your current lender may offer a better rate if you ask, particularly if you have built equity and your loan-to-value ratio has improved since you first borrowed.

Avoiding Interest-Only Periods Unless You Have a Clear Strategy

Interest-only repayments can be useful for investors managing cash flow or for owner-occupiers during a short-term financial strain, but they do not reduce your loan balance. Every month you spend on interest-only is a month where no principal is paid down, which extends the overall time it takes to pay off the loan and increases the total interest you pay. If you are currently on an interest-only period and your circumstances have improved, switching back to principal and interest repayments will start reducing your balance again and bring your loan term back on course.

If you originally took an interest-only period to improve cash flow during the first few years of ownership, check when that period ends and whether your lender will automatically convert you to principal and interest or require you to apply for the switch. Some lenders convert automatically, while others require a new serviceability assessment before approving the change.

Rounding Up Repayments to the Nearest Hundred

If your fortnightly repayment calculates to $1,847, rounding it up to $1,900 adds $53 per fortnight, or $1,378 per year, directly to your principal without requiring any significant lifestyle change. Over the life of a loan, that small adjustment can cut months off the loan term. Rounding up is one of the least disruptive ways to accelerate repayment because the amount is small enough that most households adjust to it within a pay cycle or two.

You can set up a rounded repayment amount through your lender's online portal or by contacting them directly. Most lenders allow you to nominate a repayment amount above the minimum without any formal approval process, as long as the loan allows extra repayments.

Call one of our team or book an appointment at a time that works for you. We will review your current loan structure, compare it to what is available now, and work out a repayment strategy that suits your income and goals without locking you into something that does not fit your life.

Frequently Asked Questions