How to Pay Off Your Home Loan Faster: 10 Proven Strategies

1. Make Regular Extra Repayments

Making regular extra repayments is the single most powerful strategy to reduce your loan term, potentially saving over $80,000 in interest and cutting 6 to 10 years off a 30-year mortgage. The single most powerful thing you can do to pay off your home loan faster is to make regular extra repayments. Even a modest additional amount paid consistently over years produces a dramatic result, thanks to compound interest working in your favour rather than against you.

Consider a $600,000 loan at 6.00% over 30 years. Your minimum monthly repayment is approximately $3,597. If you increase that by just $500 per month to $4,097, you will pay off the loan approximately 6 years and 8 months sooner and save around $80,000 in interest. An extra $1,000 per month cuts the loan by over 10 years.

The earlier in your loan term you make extra repayments, the more interest you save, because the compounding effect has more time to accumulate. Making extra repayments in the first 5 years of a 30-year loan saves far more than the same dollar amount paid in years 20 to 25.

2. Switch to Fortnightly Repayments

Switching from monthly to fortnightly repayments effectively adds one extra monthly payment per year, saving around $40,000 in interest and cutting approximately 4 years off your loan. Switching from monthly to fortnightly repayments is a simple, often overlooked strategy that effectively results in one extra monthly repayment per year, with minimal lifestyle impact.

Here is how it works: if your monthly repayment is $3,600, your annual repayments total $43,200. If you switch to fortnightly, you pay $1,800 every two weeks. There are 26 fortnights in a year, so your total annual repayments become $46,800, which is $3,600 more than the monthly approach. That extra month of repayments per year goes directly to reducing your principal.

On a $600,000 loan at 6%, this simple switch alone can save around $40,000 in interest and reduce your loan term by approximately 4 years, with no change to your weekly budget beyond timing.

3. Maximise Your Offset Account

An offset account reduces the loan balance on which interest is calculated, meaning every dollar sitting in it saves you the equivalent of your mortgage interest rate in after-tax returns. An offset account reduces your loan balance for interest calculation purposes without permanently locking away your money. Every dollar sitting in your offset account is a dollar you are not paying 6% interest on annually.

To maximise your offset account: consolidate all of your savings into it, use it as your primary transaction account, and avoid keeping large sums in separate savings accounts that earn taxable interest at a lower rate than your mortgage rate. For a full explanation of how offset accounts work, read our dedicated offset account guide.

4. Park Your Salary in Your Offset

Depositing your salary directly into your offset account reduces daily interest charges from pay day until you spend the money, compounding into meaningful savings over the life of your loan. Have your employer deposit your salary directly into your offset account. Because mortgage interest is calculated daily, having your full pay in the offset from pay day until you spend it reduces the daily interest calculation for that entire period.

Even if your pay is only in the offset for two weeks before you spend it on living expenses, that is two full weeks where the lender is calculating interest on a lower balance. Multiplied across a 30-year loan, this seemingly minor timing difference saves meaningful amounts of money.

5. The Credit Card Float Strategy

Using a credit card for daily spending while keeping your cash in the offset account extends the period your money reduces your mortgage interest, amplifying the offset benefit. Pair your offset account with a credit card and use the card for all day-to-day spending. Pay the card balance in full each month before the due date. This allows your cash to sit in the offset account for longer, reducing daily interest.

For example: if your spending draws down your offset by $3,000 per month, but that drawdown happens all at once at month end when you pay your credit card rather than daily throughout the month, your average daily offset balance is higher. Over a 30-year loan, this difference compounds into real savings.

6. Refinance to a Lower Rate

Refinancing to a rate just 1% lower on a $600,000 loan saves approximately $6,000 per year in interest, making it one of the fastest ways to accelerate your mortgage payoff. Australian home loan rates vary significantly between lenders, and the gap between the most competitive rate in the market and the average borrower rate is often 1% or more. On a $600,000 loan, a 1% rate reduction saves $6,000 in interest per year, or $500 per month.

If you have been with the same lender for more than two to three years and have not renegotiated, there is a strong chance you are paying more than you need to. Start by calling your existing lender and asking for a rate review. If they will not move, speak with a mortgage broker about refinancing.

Be mindful of refinancing costs: exit fees (rare now but check your loan contract), discharge fees ($200 to $400 typically), new lender application fees, and legal costs. A broker can help you calculate the break-even point to confirm refinancing makes sense for your situation.

Use our rate comparison tool to see what rates are currently available for your loan profile.

7. Consolidate Other Debts into Your Mortgage

Rolling high-interest debts such as personal loans and credit cards into your mortgage at a lower rate can dramatically reduce total interest, provided you maintain or increase your total repayments. If you carry high-interest debt, such as personal loans at 12%, car finance at 8%, or credit card balances at 20%, rolling these into your home loan at 6% dramatically reduces the total interest you pay. The key is to then pay more than the new minimum repayment, by at least the amount you were previously paying on those other debts.

For example: if you had a $15,000 car loan at 8% with repayments of $300 per month, rolling it into your home loan reduces the effective interest rate to 6%. If you then continue to pay an extra $300 per month on your home loan (where you used to pay the car loan), you accelerate mortgage repayment while saving on interest. If you simply roll the debt in and do not pay extra, you have extended the car loan to 30 years, which is rarely a good outcome.

8. Avoid Interest-Only Loans

Interest-only loans build zero equity because your repayments cover only the interest, leaving the principal untouched; switching to principal and interest repayments is one of the most impactful changes an owner-occupier can make. Interest-only (IO) loans have lower minimum repayments because you are not paying down any principal. They are sometimes used by investors for cash flow reasons, but for owner-occupiers they are almost always a poor long-term strategy.

On a $600,000 loan at 6%, an interest-only repayment is $3,000 per month. A principal and interest (P&I) repayment is $3,597 per month. After five years on an IO loan, your balance is still $600,000. After five years on a P&I loan, your balance is approximately $555,000. You have made $45,000 in progress toward owning your home.

If you are currently on an IO loan and your circumstances have changed (you are no longer an investor, or your IO period is expiring), switching to P&I immediately is one of the most impactful changes you can make. Speak with your lender or a broker. See also the MoneySmart guide on interest-only loans.

9. Make Lump Sum Payments When You Can

Applying a one-off lump sum of $5,000 to a $600,000 loan at 6% can save approximately $7,000 in total interest over the life of the loan, with earlier payments yielding greater savings due to compounding. Tax refunds, bonuses, inheritance, the proceeds from selling a car or other assets: any lump sum that arrives in your life should be considered first as a mortgage repayment opportunity. Applying a $5,000 tax refund directly to your home loan reduces the principal immediately, saving you the daily interest on that $5,000 for the remaining life of the loan.

On a $600,000 loan at 6% with 25 years remaining, a one-off $5,000 lump sum payment saves approximately $7,000 in total interest over the life of the loan. The earlier the lump sum is applied, the greater the saving due to compounding.

If your loan is fixed, check whether lump sum payments are allowed and whether there are limits. Most fixed loans allow up to $10,000 to $20,000 per year in extra repayments. If your windfall exceeds this, park the remainder in your offset account if you have one, or hold it in a high-interest account until the fixed period ends.

10. Review Your Loan Every 12 Months

An annual home loan review can uncover rate savings of 0.30% to 0.80% or more, potentially saving tens of thousands of dollars over the remaining loan term. The mortgage market changes constantly. Rates move, new products emerge, and your own financial circumstances evolve. A loan that was competitive when you took it out three years ago may be significantly above the current market rate today.

Set a calendar reminder annually to review your home loan. Check your current rate against the market. Call your lender and ask for a rate reduction. If they will not negotiate, speak with a broker about whether refinancing makes sense. Even a small rate reduction, maintained over the years remaining on your loan, can save you tens of thousands of dollars.

Also review your loan features annually: is your offset account optimised? Are you on the right repayment type for your current circumstances? Would a different loan structure, such as a split loan, serve you better? A good mortgage broker will do this review at no cost, as they are paid by the lender on settlement.

Vish

Founder and Licensed Mortgage Broker

Vish studied medicine and law at the University of Sydney before switching to finance broking after no one would help him get a loan for his first property. He bought 3 properties before turning 24 and started Lendera because he believes borrowers deserve transparency, not gatekeeping. You can compare rates from 60+ lenders without entering any personal details, access the Home Loans Academy and first home buyer and refinancing checklists at no cost, and speak to his team of brokers when you are ready.

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