How to Pay Off Your Home Loan Faster: 8 Strategies That Save Australians Thousands

1. Switch to Fortnightly Repayments

This is one of the easiest wins. Instead of paying monthly, pay half your monthly repayment every two weeks.

Here is why it works. There are 26 fortnights in a year, which means you end up making 26 half-payments. That is the equivalent of 13 monthly payments instead of 12. You are making one extra full month of repayments each year without even noticing it.

On a $500,000 loan at 6%, switching to fortnightly repayments can save you around $94,000 in interest and cut 4.5 years off the loan. All without spending a single extra dollar from your pay.

2. Make Extra Repayments

Even small extra repayments make a huge difference over time because they reduce your principal balance, which means less interest is charged going forward. It compounds.

Here is what the numbers look like on a $500,000 loan at 6% over 30 years.

$100 a month is about $25 a week. That is roughly what most people spend on takeaway coffee. The same small amount, redirected to your mortgage, saves you over $53,000 and nearly four years.

Use our Loan Repayment Calculator to see exactly how much you would save with extra repayments at your loan amount and rate.

3. Make Lump Sum Payments

Got a tax refund, a work bonus, or an inheritance? Putting a lump sum directly onto your mortgage can save you a surprising amount.

A $20,000 lump sum payment in the first year of a $500,000 loan at 6% saves approximately $98,000 in interest over the remaining life of the loan. The earlier you make the payment, the bigger the saving, because you are reducing the principal that interest is calculated on for a longer period.

The same $20,000 deposited in year 10 saves around $42,000. Still significant, but less than half of what it saves in year one. Timing matters.

4. Use an Offset Account

An offset account is a transaction account linked to your mortgage. The balance in this account offsets the amount of interest you are charged. If you owe $500,000 and have $50,000 in your offset, you only pay interest on $450,000.

The beauty of this is that your money is still accessible. You can use it for everyday spending, bills, and emergencies. It just sits there reducing your interest in the background.

A common strategy is to have your salary deposited straight into your offset account and pay all your bills from it. Every dollar sitting in there, even for a few days, reduces your interest.

Over the life of a $500,000 loan, keeping $50,000 consistently in an offset account can save you roughly $82,000 in interest.

Want to learn more about how offset accounts compare to redraw facilities? Read our guide on Offset vs Redraw.

5. Maintain Repayments When Rates Drop

When the RBA cuts rates and your repayments decrease, it is tempting to enjoy the extra cash. Instead, keep paying the same amount you were paying before. The difference goes straight to reducing your principal.

For example, if a 0.25% rate cut reduces your repayment by $82 a month, keep paying the old amount. That $82 extra goes directly to paying down your loan faster.

You will not miss money you were already used to spending, and over time the cumulative effect is significant.

6. Round Up Your Repayments

If your minimum repayment is $2,347 a month, round it up to $2,400 or even $2,500. The extra $53 to $153 might not feel like much month to month, but over 30 years it adds up to years off your loan.

This is one of the lowest effort strategies on this list. Set up the rounded amount as your automatic payment and forget about it. Your future self will thank you.

7. Refinance to a Lower Rate

If your current rate is more than 0.5% above what other lenders are offering, refinancing could save you a lot. Even a small rate reduction on a large loan translates to significant savings over the remaining term.

Before you switch, make sure the savings outweigh the costs. There are discharge fees, potential break costs (if you are on a fixed rate), and application fees to factor in.

Our Refinance Calculator shows you exactly how much you would save after accounting for all the costs. And our Compare page lets you browse current rates from Australian lenders to see what is available.

For a deeper look at the refinancing process, check out our guide on How to Refinance Your Home Loan.

8. Do Not Extend Your Loan Term When Refinancing

This is one that catches a lot of people. When you refinance, the new lender will often default to a fresh 30-year term. If you had 22 years left on your old loan and you refinance to a new 30-year term, you have just added 8 years to your mortgage.

Even at a lower rate, those extra years can mean you pay more total interest than if you had stayed with the original loan. Always ask the new lender to match your remaining term. If you had 22 years left, refinance to a 22-year term.

Better yet, if you can afford it, refinance to a shorter term. Going from 22 years to 20 years at a lower rate means you pay less per month and finish sooner.

The Power of Starting Early

Every strategy on this list works better the earlier you start. That is because of how interest compounds. Early in your loan, most of your repayment goes toward interest and very little toward the principal. Any extra you pay early on reduces the balance that interest is charged on for decades to come.

A $10,000 extra payment in year 1 saves far more than the same $10,000 in year 20. If you are going to do one thing from this list, do it now. The longer you wait, the less impact it has.

A Quick Warning About Fixed Rate Loans

If you are on a fixed rate, check your loan terms before making extra repayments. Most fixed rate loans cap extra repayments at $10,000 to $20,000 per year. If you go over that limit, you may face break costs.

Variable rate loans usually have no limit on extra repayments, which is one of the reasons they are popular with people who want to pay off their loan faster.