Paying off your mortgage faster isn't just about making extra payments—it's about using the right strategies that work for your situation. This guide shows you proven methods to shave years off your loan and save thousands in interest.
Why Pay Off Your Mortgage Faster?
The numbers speak for themselves. On a typical $600,000 loan at 6.5% over 30 years:
- Total interest paid: ~$766,000
- Total repaid: ~$1.36 million
That's more in interest than the original loan! Even small changes can make a massive difference.
Example: Extra $200/month
Adding just $200 per month in extra repayments to a $600,000 loan at 6.5% could:
- Save ~$120,000 in interest
- Pay off 5+ years earlier
Strategy 1: Make Extra Repayments
The most straightforward approach—pay more than the minimum. Every dollar extra goes directly to reducing your principal, which means less interest over the life of the loan.
How to Find Extra Money
- Direct a portion of pay rises to your loan
- Put tax refunds toward the mortgage
- Redirect savings from paid-off debts (car loan, etc.)
- Round up repayments (e.g., $2,847 → $3,000)
- Make small weekly sacrifices ($50/week = $2,600/year)
Fixed Rate Warning
If you're on a fixed rate, check your extra repayment limits. Most fixed loans cap extras at $10,000-$30,000 per year. Going over could trigger break costs.
Strategy 2: Switch to Fortnightly Payments
This simple change can take years off your loan without feeling like you're paying more.
How it works: Instead of 12 monthly payments, you make 26 fortnightly payments. That's equivalent to 13 monthly payments per year—one extra month of repayments automatically.
Example: On a $600,000 loan at 6.5%:
- Monthly: $3,792/month (12 payments)
- Fortnightly: $1,896/fortnight (26 payments = ~$49,300/year vs ~$45,500)
This alone could save 4-5 years on a 30-year loan.
Strategy 3: Use an Offset Account
An offset account is a savings account linked to your mortgage. Your savings balance "offsets" your loan balance, reducing the interest you pay.
Example
- Loan: $500,000
- Offset balance: $30,000
- Interest charged on: $470,000
The beauty is your savings remain accessible for emergencies, but they're working to reduce your interest every day.
Power Move: Salary Crediting
Direct your salary into your offset account. Even though you spend it throughout the month, having a higher balance for those days reduces your daily interest calculation.
Strategy 4: Refinance to a Lower Rate
Sometimes the biggest impact comes not from paying more, but from paying less interest. A rate reduction means more of each payment goes toward principal.
When to Consider Refinancing
- Your current rate is 0.5%+ higher than comparable loans
- Your fixed rate period is ending
- Your property value has increased (better LVR = better rates)
- Your income/situation has improved since you first borrowed
Use our refinance calculator to see potential savings.
The Rate Check Question
Before making extra repayments, ask: "Is my rate competitive?" Paying extra on a high-rate loan is less effective than refinancing to a lower rate first, then making extras.
Strategy 5: Reduce Your Loan Term
When refinancing, consider shortening your loan term. Yes, repayments increase, but you pay dramatically less interest overall.
Comparison: $500,000 at 6.5%
| Term | Monthly | Total Interest |
|---|---|---|
| 30 years | $3,160 | ~$638,000 |
| 25 years | $3,386 | ~$515,000 |
| 20 years | $3,729 | ~$395,000 |
Switching from 30 to 25 years costs ~$226/month more but saves ~$123,000 in interest.
Strategy 6: Avoid Extending Your Loan Term
When refinancing, many people reset to a new 30-year term for lower repayments. This can cost you years of progress.
The Refinance Trap
You've paid 5 years on a 30-year loan, so you have 25 years left. When refinancing, if you take a new 30-year term, you've added 5 years back. Even if your rate is lower, you may pay more overall. Always match or reduce your remaining term.
Which Strategy Works Best?
The best approach depends on your situation:
- Steady income, variable rate: Extra repayments + offset account
- High rate vs market: Refinance first, then make extras
- Irregular income: Offset account (accessible savings)
- Disciplined saver: Shorter loan term for forced savings
The Best Strategy? Combine Them All
- Step 1: Check your rate is competitive (refinance if not)
- Step 2: Switch to fortnightly payments
- Step 3: Use an offset account for your savings
- Step 4: Direct windfalls to extra repayments
- Step 5: Consider shortening term at next refinance
Calculate Your Savings
Want to see exactly how much you could save? Use our free calculators:
- Extra Repayment Calculator — See time and interest saved
- Refinance Calculator — Check if a better rate is available
Next Steps
- Use our Extra Repayment Calculator to model different scenarios
- Book a free rate check to see if you're paying too much
