How you could pay off your mortgage faster

Use these tips to save serious money on your home loan.

There are so many simple ways to quickly cut down how much you owe on your mortgage beyond just making extra repayments. There are multiple features already included in your home loan that can assist you in this. If your home loan lacks these features, you may be able to refinance.

Is it possible to pay off the average home loan in 10 years?

1. Increase your repayment frequency

Make fortnightly or 'bi-monthly' payments

You really can save tens of thousands of dollars in interest charges and reduce your loan term by making fortnightly rather than the standard monthly repayments.

Here's how it works. Let's assume your monthly repayment is $1,000. Don't do any fancy calculations here. Just divide your monthly payment amount by 2 and pay this new amount on the same day every fortnight. You'll be paying $500 per fortnight.

Now, if you were to stick to your monthly payments of $1,000 you would end up paying $12,000 by the end of that year (12 months x $1,000 = $12,000). However, if you make fortnightly payments of half your monthly amount, you end up making exactly one additional payment per year (26 fortnights x $500 = $13,000).

This additional payment helps to reduce your balance faster. You could cut your loan term by as much as six years by doing this. Use our calculator below to work out the effect fortnightly or bi-monthly repayments might have on your home loan.

What about weekly payments?

Weekly payments don't accelerate the effect of bi-monthly payments, but they still put you ahead due to the way interest is charged.

Let's assume your monthly payments are still $1,000. Divide this figure by 4 to get $250 per week. Pay this amount of money on the same day every week. If you pay $1,000 per month, you'll pay $12,000 by the end of the year (12 months x $1,000 = $12,000). If you pay $250 per week, you'll pay $13,000 by the end of the year (52 weeks x $250 = $13,000).

2. Make your interest calculations work for you

Take advantage of interest calculations

The interest on your mortgage is calculated on the outstanding balance every day. This means you can reduce the amount of interest you pay overall by increasing how often you make a payment on your mortgage. Let's take a look at an example. In this scenario, you owe $300,000 and you're paying 6.06% interest. Your monthly repayments are $1,810.24.

Payment NumberLoan AmountPaymentInterest PaidBalance
1$300,000$1810.24$1515.00$299,704.76

After just one month, you've paid $1810.24 on your repayment and you've paid $1515.00 in interest charges.

Fortnightly

Let's see what happens if you pay exactly the same amount of money over the same four weeks, but you pay it more frequently. In this example we'll make exactly two fortnightly payments of $905.12 – this is exactly half of the previous monthly payment.

Payment NumberLoan AmountPaymentInterest PaidBalance
1$300,000$905.12$699.23$299,794.11
2$299,794.11$905.12$698.75$299,587.74
(totals)($1810.24)($1397.98)

By paying fortnightly, you only paid $1397.98 in interest instead of $1515.00. This is $117.02 less interest coming out of your hard earned cash. On top of this, your balance is down to $299,587.74. Of course this is $117.02 less than the previous example, as that interest saving is now paid off your mortgage balance instead.

Weekly

Let's look at how paying the exact same amount of money on a weekly basis affects your mortgage balance. Your monthly payment is still $1810.24. Divide this number by four to get $452.56 and pay this amount weekly.

Payment NumberLoan AmountPaymentInterest PaidBalance
1$300,000$452.56$349.62$299,897.05
2$299,897.05$452.56$349.50$299,793.99
3$299,793.99$452.56$349.38$299,690.80
4$299,690.80$452.56$349.26$299,587.49
(totals)($1810.24)($1397.76)

Once again, you've still paid exactly the same monthly payment amount of $1810.24 over those four weeks, so you haven't made any extra payments yet; however, the amount of interest you've paid is $1397.76 instead of $1515. This $117.24 you saved gets paid off your mortgage balance instead. This figure is only marginally higher than the amount you saved by paying fortnightly. However, this example only runs over one month. Over the term of a 30 year loan, those small savings really do add up to a lot of money.

3. Rounding up: small change counts

The vast majority of banks will allow you to nominate the amount you want to use to make each repayment. This means you don't have to pay just the minimum amount. Of course, if you don't want to stretch your budget too far you can simply round up the payment you make to the nearest $5 or $10. This makes it easier to remember and it counts as making an extra payment.

If you have a mortgage of $300,000 at 6.06% your monthly payment is $1810.24. Round this figure up to an even $1820 each month. It's only $9.76 per month extra so it won't break your budget. Yet, you'll shave 6 months off the end of your mortgage term and save $6,293.33 in interest charges. Small change has a big impact. Imagine how much more you could save and how much faster you'd repay your mortgage if you could round up that number even higher.

4. Use the features

Offset accounts

Any opportunity you have to reduce the amount of interest you're charged helps you to pay off your mortgage faster. If your home loan has the capacity to link a 100% offset account to it, it can help you pay your home loan off faster. Every dollar you leave in your offset savings account actively reduces the amount of interest you pay on your mortgage. For example, if your mortgage is $300,000 and you have $10,000 in your offset account you'll only pay interest on $290,000.

Redraw facilities

Another popular modern home loan feature is redraw, where you can withdraw money from your home loan if you have made additional repayments. This gives you the freedom to make additional repayments, without having to worry about losing access to those funds in an emergency.

You will need to make sure that your mortgage repayment plan allows additional repayments because if it is not an included feature, you will usually pay high fees each time you make an additional repayment or redraw.

5. Review your own loan

No matter which bank your home loan is with right now, you're almost certain to find a better deal out there. Take some time to shop around and compare what other lenders are charging for their home loans.

When you've done a bit of homework, call your bank and ask them if they're able to offer you a better rate than the one you're already paying. Let them know you've shopped around and you're aware of what else is available. Then see if they're willing to negotiate for a better rate.

Even a small reduction in interest rate can save you money. For example:

Interest Rate Reduction
Loan AmountOriginal Interest Rate & Payment0.1% Discount & PaymentInterest Saved over Loan Term
$250,0006.26% - $1,540.926.16% - $1,524.69$5,842.80
$300,0006.26% - $1,849.106.16% - $1,829.63$7,011.36
$350,0006.26% - $2,157.296.16% - $2,134.57$8,179.92

As you can see from the examples above, even a small reduction in interest rate of just 0.1% can reduce your monthly repayment a little. However, it's over the entire loan term that the interest savings become apparent.

Learn more about saving money on your home loan

6. Switch loan types

Most banks and lenders offer more than one type of home loan product. Some will carry higher interest rates than others. Some will have package discounts available on them. Others will have additional features and products that you might be able to take advantage of.

For example: You should find that a Basic Variable home loan will offer a much lower interest rate than a Standard Variable home loan. However, there are significant differences between the features and flexibility of these loans, so be sure you're comparing the type of loan you really need. If you don't use the features attached to your current home loan now to your advantage, you might find that a Basic Variable loan will be fine for you. This can help to reduce your interest rate, reduce your monthly repayment and save you thousands over the loan term.

The drawbacks of mortgage overpayments

Whether you can repay your mortgage early will also depend on whether your lender charges early repayment and overpayment fees. If you truly want to benefit from mortgage overpayments to get out of debt sooner, make sure you choose a home loan which allows unlimited additional repayments for free.

If you do have a home loan which charges fees for additional repayments, consider saving up any additional repayments and make them as one lump sum amount to lessen the fees applied. If your loan does allow unlimited repayments without a fee check to see if this feature comes with a higher interest rate. You may be smarter to look at shopping around for another loan.

You may also want to think about applying any financial windfalls to your home loan. If you get bonuses at work, you work on a commission basis, you get a generous tax bonus or gift of cash on your birthday, all of these can go towards repaying your home loan debt sooner.

Compare a selection of home loans

Rates last updated November 20th, 2018
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Loan purpose
Offset account
Loan type
Repayment type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.87%
3.91%
$600
$0 p.a.
95%
A home loan with no ongoing fee and a redraw facility that you can borrow up to 95% LVR.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2000000 from a convenient online lender.
3.57%
3.58%
$0
$0 p.a.
80%
Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.
3.54%
3.58%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility. $900 cashback offer.
3.68%
3.70%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.75%
3.80%
$600
$0 p.a.
90%
Competitive variable rate mortgage with a partial offset account. Get this loan with a 10% deposit.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150000 get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.54%
3.57%
$0
$0 p.a.
80%
A competitive variable essentials interest rate product aimed at refinancers looking to switch to a lower rate.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Get double Velocity Frequent Flyer Points with this mortgage to spend on flights and more (for a limited time, subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.59%
4.00%
$845
$350 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.88%
3.89%
$0
$0 p.a.
90%
Save on interest with a free 100% offset account and buy your property with just a 10% deposit.
3.69%
4.86%
$0
$395 p.a.
90%
Special discounted rate for first home buyers. Start your home buying journey with 2 years of fixed repayments at a competitive rate plus package discounts. Available with a 10% deposit.
3.69%
4.12%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.68%
3.70%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers that comes with a no fee debit card with a $5,000 limit.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.75%
3.75%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.
3.67%
3.72%
$600
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.75%
4.72%
$0
$299 p.a.
95%
Owner-occupiers can enjoy a discounted fixed rate, a rate lock feature and the ability to make additional repayments.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn double Velocity Frequent Flyer Points on your mortgage for a limited time (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.74%
4.13%
$0
$349 p.a.
90%
Get a sharp rate plus package discounts and a 100% offset account.
3.79%
3.80%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Plus $1,500 cashback offer for eligible refinancers.
3.84%
3.85%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.64%
3.59%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.80%
3.80%
$0
$0 p.a.
70%
Earn tens of thousands of Qantas Points to spend on flights, hotels and more with this variable owner occupier mortgage. Competitive variable rate mortgage that requires a 30% deposit.
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.85%
3.85%
$0
$0 p.a.
80%
Low fee loan with extra repayments. Pay no application and ongoing fees and take advantage of split and redraw options.
3.83%
4.89%
$0
$395 p.a.
80%
A flexible 3 year fixed rate loan you can use to buy your own home.
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.84%
3.84%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.87%
3.91%
$0
$10 monthly ($120 p.a.)
90%
Get Velocity Frequent Flyer Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.84%
4.22%
$345
$0 p.a.
80%
Flexible, competitive variable rate that has flexible repayments, split and redraw facilities.
3.85%
4.69%
$0
$0 p.a.
90%
A package home loan with a sharp fixed rate and a 10% deposit option for low deposit borrowers.
3.70%
3.90%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.85%
4.18%
$500
$0 p.a.
95%
Apply for Easy Street fixed rate home loans and get a competitive loan with a fixed interest rate.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.89%
4.27%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan.
3.59%
3.58%
$0
$0 p.a.
80%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for a small fee.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.84%
3.82%
$0
$0 p.a.
80%
A fixed rate loan with free redraws, few ongoing fees. Apply online with a fast approval process.
3.89%
3.94%
$0
$0 p.a.
80%
Pay no application or ongoing fee and borrow up to 80% LVR.
3.73%
3.87%
$0
$10 monthly ($120 p.a.)
80%
Borrow up to $500000 and earn Velocity Frequent Flyer Points (terms and conditions apply).
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate. Cut down on interest costs with a 100% offset account.
3.69%
4.75%
$0
$395 p.a.
90%
Enjoy a competitive rate with no application fee for this package loan.
3.79%
4.87%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited fees.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features. This product comes with a 100% offset account.
4.04%
4.07%
$0
$0 p.a.
90%
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
3.69%
4.08%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.89%
3.91%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.99%
5.35%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.89%
3.94%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.72%
3.72%
$0
$0 p.a.
90%
New customers can get a discounted variable rate and a fee-free redraw facility. NSW, QLD and ACT residents only.
3.94%
4.95%
$595
$0 p.a.
95%
Borrow up to 95% LVR of the value of the property you're buying and pay no application or ongoing fees.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive fixed interest rate product with no ongoing bank fees.
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at $70% or below with this innovative online lender.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.69%
4.54%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150000 receive a discounted rate. NSW, QLD and ACT residents only.
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.

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4 Responses

  1. Default Gravatar
    CarterAugust 24, 2015

    Hey,
    I am doing a maths assignment and have been asked
    “the effect that the frequency of the repayment (weekly, fortnightly, monthly) can have on the total amount repaid”
    Could you please help me answer this :)

    Cheers

    • finder Customer Care
      BelindaAugust 25, 2015Staff

      Hi Carter,

      Thanks for your enquiry.

      On this page you can read our review about fortnightly vs monthly repayments and you can use our bi-monthly calculator to estimate the interest and time saved on a mortgage based on different repayment frequencies.

      Thanks,
      Belinda

  2. Default Gravatar
    RussellAugust 23, 2015

    How does the calculator know how much I am currently paying monthly

    • finder Customer Care
      MarcAugust 24, 2015Staff

      Hi Russell,
      thanks for the question.

      This calculator uses an estimate on what loan repayments would be for the figures entered into it. As such it should be used as an estimate only.

      I hope this helps,
      Marc.

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