How you could pay off your mortgage faster

Four tips you can use which can help you pay down your home loan quickly.

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.

Mix and match any of the above and review your own loan

The best part about mortgage reduction tips is that you have the freedom to mix and match them to suit your own budget and your own preferences. You can even put them all to good use and take advantage of the interest savings as you repay your home loan much faster.

Do some simple calculations and see what effect making a few extra repayments can make to your current mortgage. Work out how much you'll save by making your payments more frequently.

Really sit down and work out your budget to see how much extra you're able to afford. Each of these things will help you to pay off your home loan faster in the long run. It's also important to compare your options and check the market for loans that have a better rate. Refinancing your loan with another lender may help save you thousands.

Learn more about saving money on your home loan

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 May 21st, 2018
$
Loan purpose
Offset account
Loan 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
3.69%
3.69%
$0
$0 p.a.
80%
Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply). Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.64%
3.84%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.69%
3.71%
$0
$0 p.a.
80%
A low rate variable home loan offer with no monthly fees or application fee charge.
3.69%
4.06%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.49%
4.49%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.
3.79%
3.79%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan.
3.52%
3.53%
$0
$0 p.a.
80%
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.79%
4.06%
$0
$20 monthly ($240 p.a.)
80%
Add a Platinum Rewards Mastercard with this package loan and you could earn 150,000 Bendigo reward points (Victoria only, terms and conditions apply).
3.69%
4.86%
$0
$395 p.a.
90%
Start your home buying journey with 2 years of fixed repayments and a reasonable rate from a big 4 bank. Available with a 10% deposit.
3.77%
3.81%
$200
$0 p.a.
95%
A simplified mortgage with a low interest rate and a redraw facility.
3.68%
3.69%
$0
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
3.69%
3.73%
$600
$0 p.a.
95%
Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
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.
3.68%
3.69%
$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.
3.87%
3.87%
$0
$10 monthly ($120 p.a.)
90%
Get Virgin Velocity Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.69%
3.74%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.69%
4.04%
$0
$350 p.a.
95%
A competitive rate with no application fee.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate loan comes with no application or ongoing fees, and offers a flexible repayment schedule.
3.96%
3.98%
$350
$0 p.a.
90%
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.62%
3.62%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.62%
3.62%
$0
$0 p.a.
95%
Free home and contents insurance for 1 year. Terms and conditions apply. QLD residents only.
3.73%
3.73%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.79%
3.83%
$600
$0 p.a.
80%
A low interest rate loan with limited fees and a redraw facility. Principal and interest repayments only.
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.
3.78%
3.78%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.81%
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.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
3.90%
4.78%
$600
$0 p.a.
95%
A competitive fixed rate mortgage with split facilities and extra repayments. You can get this loan with a 5% deposit.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.74%
3.74%
$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.
4.09%
4.12%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
3.88%
4.89%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited 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.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.89%
4.87%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
3.64%
3.64%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.85%
4.05%
$0
$350 p.a.
95%
This high LVR fixed rate loan allows you to borrow up to 95% of the value of the property you're buying.
4.09%
4.11%
$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%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.69%
4.47%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.85%
4.82%
$600
$35 monthly ($420 p.a.)
90%
Make up to $10,000 in extra repayments per year and take advantage of a flexible repayment schedule.
3.79%
3.80%
$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.
3.99%
4.03%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and pay no application or ongoing fees.
3.89%
4.96%
$0
$395 p.a.
95%
Refinancers can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.89%
4.97%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
4.09%
3.79%
$0
$0 p.a.
70%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.64%
3.65%
$0
$0 p.a.
95%
Family pledge option available. Get a special discount off Bank of Melbourne's basic variable rate.

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Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

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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

    • Staff
      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

    • Staff
      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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