A home loan is a long-term financial commitment, but it doesn’t have to take decades to pay off. With the right strategies, you can pay off your home loan sooner, reduce interest costs, and achieve financial freedom faster.
Interest rates fluctuate, and taking control of your mortgage now can save you thousands in the long run. Here’s how you can start paying off your home loan more efficiently today.
1. Increase Your Repayments
One of the fastest ways to reduce your mortgage is by paying more than the minimum repayment.
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How it helps:
- Lowers the principal faster, reducing interest over time
- Shortens the overall loan term
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Example:
If your minimum repayment is $2,000, increasing it to $2,200 per month could save you years on your mortgage.
Check with your lender: Some banks charge early repayment fees, especially on fixed-rate loans.
A mortgage repayments calculator will quickly show what savings can be achieved.
2. Switch to Fortnightly Payments
Most home loans require monthly repayments, but switching to fortnightly can save money.
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Why it works:
- By making half your monthly repayment every two weeks, you make an extra monthly repayment each year
- Helps cut years off your home loan and saves thousands in interest
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Example:
If your monthly repayment is $3,000, switching to $1,500 every two weeks results in one extra full payment annually.
3. Use an Interest Offset Account
An offset account is a transaction account linked to your mortgage. Any money in this account reduces the amount of interest charged on your loan.
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Why it’s effective:
- Reduces the interest charged on your outstanding balance
- Helps lower the loan term without changing your repayments
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Example:
A $50,000 offset balance on a $500,000 loan means you’re only paying interest on $450,000. -
Note: Offset accounts are usually only available with variable-rate loans.
4. Refinance to a Lower Interest Rate
Interest rates change over time, and loyalty to your bank may cost you more.
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How to refinance smartly:
- Compare your current rate with competitor rates
- Negotiate with your lender for a lower rate
- Consider switching lenders if better options are available
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Example:
A 0.50% reduction in interest on a $500,000 loan can save you thousands in the long run. -
Check for break fees: Fixed-rate loans may have early exit costs.
5. Keep Repayments the Same After a Rate Cut
If your lender reduces your interest rate, don’t reduce your repayments—keep them the same to pay off your home loan faster.
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Why this works:
- The extra payment reduces the principal faster
- You pay less interest over time
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Example:
If your repayment drops from $2,500 to $2,300, keeping it at $2,500 means an extra $200 per month goes towards the principal.
6. Pay Principal and Interest, Not Interest-Only
Interest-only loans keep your repayments lower, but they don’t reduce your loan balance.
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Why principal & interest loans are better:
- Builds home equity faster
- Reduces long-term interest costs
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Example:
A $400,000 interest-only loan for five years means you haven’t reduced the balance at all—you’ve only paid interest.
7. Pay Fees Upfront
Lenders often offer to roll loan setup fees into the mortgage. While this may help short-term, it increases the total loan balance.
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Why paying fees upfront helps:
- Keeps your loan balance lower from day one
- Reduces the total interest charged
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Watch for additional fees: Some banks charge valuation, settlement, and application fees.
8. Use Your Home Equity Wisely
As property values rise, homeowners build equity—the difference between the home’s value and the amount owed on the loan.
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How to use home equity smartly:
- Renovations: Invest in home improvements to increase property value
- Debt consolidation: Use equity to pay off high-interest debts
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Avoid unnecessary redraws: Redrawing funds for non-essential expenses can slow down your repayment progress.
9. Split Your Loan for More Flexibility
A split loan allows you to divide your mortgage into fixed and variable portions.
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Why it’s beneficial:
- The fixed portion protects against interest rate hikes
- The variable portion allows for extra repayments
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Example:
A 50-50 split loan gives you both stability and repayment flexibility.
10. Bundle Your Loan with a Financial Package
Some lenders offer special loan packages that come with discounted interest rates and waived fees.
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Benefits of financial packages:
- Reduces your home loan interest rate
- May include offset accounts, credit cards, and insurance discounts
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Check eligibility: Some packages require minimum loan amounts or specific income levels.
Final Thoughts: Paying Off Your Home Loan Sooner
With the right strategies, you can start paying off your home loan sooner and save thousands in interest.
- Increase or make more frequent repayments
- Use an offset account and refinance when necessary
- Stay on top of interest rate changes and financial packages
Need Mortgage Advice?
Want expert guidance on paying off your home loan sooner? Our Lending team can help you find the best loan strategies to reduce your mortgage faster.
Call our team on (03) 8393 1000 to get started today.
