Home loan interest is usually calculated daily, so reducing your balance earlier (through extra repayments, offsets or repayment frequency changes) can lower total interest paid over time.
Switching from monthly to fortnightly repayments can result in the equivalent of one extra monthly repayment each year, without increasing the size of each repayment (lender rules apply).
Even small, regular extra repayments can make a difference. For example, an extra $100 per month on a $500,000 loan could save thousands in interest and shorten the loan term (example only).
Offset accounts and extra repayments both reduce interest, but suit different cash-flow needs. Offsets keep money accessible, while extra repayments reduce the loan balance directly.
The most effective repayment strategy is one that’s sustainable and suited to your loan terms, which is why many borrowers review their options with a broker before making changes.
For many Australian homeowners, paying off a home loan faster isn’t about big sacrifices; it’s about using spare cash more effectively. Extra repayments can be one way to do that.
By paying more than the minimum required, you reduce your loan balance sooner. Because home loan interest is calculated daily on the remaining balance, even small, regular extra repayments can lower the total interest you pay and shorten your loan term over time (subject to your loan’s conditions).
This approach isn’t about quick wins. It’s about making steady, manageable progress that fits your budget and your loan structure.
This guide breaks down how extra repayments work, when they’re worth considering, and how they can form part of a balanced home loan strategy that maintains flexibility.
Pro tip: You can use our extra repayments calculator to estimate how additional payments could affect your loan term and interest costs.
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Simple ways to pay off your home loan faster
Making extra repayments is one of the most practical ways to pay off your home loan sooner, but how you do it matters. From paying a little extra each month to using features like offsets, redraw and refinancing, the right approach depends on your cash flow, loan structure and appetite for flexibility.
This section breaks down the common strategies borrowers use to reduce interest and shorten their loan term, and explains how each option works, so you can decide what makes sense for your situation.
Make regular extra repayments.
Making extra repayments is one of the most straightforward ways to reduce your home loan sooner. These are payments you choose to make on top of your minimum required repayment, at a frequency that suits your cash flow (weekly, fortnightly, monthly or ad hoc).
The amounts don’t need to be large. What matters most is consistency.
What are extra repayments?
Extra repayments are any payments made above your scheduled minimum home loan repayment. These amounts are applied directly to your loan principal, reducing the balance on which your interest is calculated. In most cases, extra repayments are available on variable-rate home loans.
Some fixed-rate loans allow limited extra repayments, but caps or break costs may apply. Loan rules vary by lender and product, so it’s important to check before making changes.
So, how do regular extra repayments make a difference?
Home loan interest is generally calculated daily on the outstanding balance.
Reducing that balance earlier means less interest accrues over time. Regular extra repayments can reduce your loan balance sooner, lower the total interest paid over the life of the loan, and shorten your loan term by months (or, in some cases, years).
For many owner-occupiers, small, manageable repayments made regularly are easier to maintain than occasional lump sums and can be more effective over the long term.
What could a small extra repayment look like in practice?
Here’s a simplified example to show how consistency adds up:
Loan details | Minimum repayments only | With $100 extra per month |
|---|---|---|
Loan amount | $500,000 | $500,000 |
Loan term | 30 years | ~27 years 10 months |
Interest rate | 2% p.a. (example only) | 2% p.a. (example only) |
Monthly repayment | ~$1,848 | ~$1,948 |
Total interest paid | ~$165,000 | ~$153,000 |
Interest saved | — | ~$12,000 |
Time saved | — | ~2 years |
Note: Figures are indicative only. Actual results will depend on your loan balance, interest rate, repayment frequency and lender rules.
In this example, adding an extra $100 per month could result in more than $12,000 saved in interest and a loan paid off over two years sooner. Remember, actual savings will depend on your interest rate, loan balance and lender rules. The key principle remains the same: the earlier and more consistently you reduce the balance, the less interest you pay overall.
You can use our extra repayments calculator to see how different amounts could affect your own loan.
Switch to fortnightly repayments.
Switching from monthly to fortnightly repayments is a simple change that may help you pay down your home loan sooner without increasing your repayment amount.
You’re not increasing each repayment amount, only the frequency.
But how can fortnightly repayments help reduce your loan sooner?
There are 12 months in a year, but 26 fortnights. When you repay fortnightly, you effectively make the equivalent of 13 monthly repayments each year instead of 12.
That extra repayment goes directly toward reducing your loan balance. Over time, this can lower the total interest charged and shorten your loan term (depending on your loan’s terms).
Because home loan interest is generally calculated daily on the outstanding balance, paying more frequently may also slightly reduce the interest that accrues between repayments.
What does this look like in practice?
Repayment type | Amount | Total paid per year |
|---|---|---|
Monthly | $1,600 | $19,200 |
Fortnightly | $800 | $20,800 |
Note: Figures are indicative only. Actual results will depend on your loan balance, interest rate, repayment frequency and lender rules.
By switching to fortnightly repayments, you effectively pay an extra $1,600 off your loan each year without changing the size of each repayment, just the frequency.
Over the life of a loan, that additional repayment can make a meaningful difference to how quickly the balance reduces. For many owner-occupiers, fortnightly repayments can be:
Easier to manage when aligned with pay cycles
Low risk, as funds aren’t locked away
More effective when maintained consistently over time
How repayments are applied can vary by lender and loan type, so outcomes will depend on your interest rate, balance and loan structure.
Use an offset account effectively.
An offset account can be an effective way to reduce the interest on your home loan, provided it’s used deliberately. Instead of keeping spare cash in a standard savings account, an offset account reduces the balance on which your loan interest is calculated.
So, how does an offset account reduce interest?
An offset account is a transaction or savings account linked to your home loan. The balance held in the account is offset against your loan balance, so interest is charged on a lower amount. For example:
Example Illustration | Amount |
|---|---|
Home loan balance | $500,000 |
Offset account balance | $60,000 |
Interest charged on | $440,000 |
Note: Figures are indicative only. Actual results will depend on your loan balance, interest rate, repayment frequency and lender rules.
Because home loan interest is typically calculated daily, keeping funds in your offset can reduce interest every day the money remains there while still allowing full access to your cash.
Using an offset account well often involves:
Holding your emergency buffer in the offset
Parking short-term savings, such as tax or irregular income
Using the offset as your primary transaction account, where appropriate
This approach can reduce total interest over the life of the loan while maintaining access to funds for everyday or unexpected expenses.
Offset accounts vs extra repayments
Compared with making extra repayments, money held in an offset account reduces interest similarly, remains fully accessible at all times, and doesn’t usually require a redraw request.
For borrowers who want flexibility (including households with variable income or changing expenses), an offset account can provide a practical balance between saving and paying down debt.
However, offset accounts may come with annual package fees or higher interest rates compared with basic home loan products.
That means an offset account isn’t automatically the best option for every borrower. Any interest savings need to outweigh the ongoing costs to make it worthwhile.
Put windfalls or bonuses to work earlier.
When you receive a lump sum, timing matters. Applying windfalls or bonuses to your home loan sooner can reduce interest and shorten your loan term without changing your regular repayments. This approach works best when windfalls are treated as a one-off reduction to your loan balance, rather than funds that sit untouched for years.
What counts as a windfall? A windfall is typically a one-off or irregular payment, such as a tax return, work bonus or commission, inheritance or gift, or proceeds from selling an asset (car or shares).
Because these amounts aren’t usually built into everyday spending, many borrowers consider directing at least part of them toward their home loan.
Home loan interest is generally calculated daily on the outstanding balance. Reducing that balance earlier gives interest less time to accumulate. Applying a lump sum earlier in the loan term can:
Lower interest charged across the remaining life of the loan
Reduce the total cost of the loan over time
Bring forward your mortgage-free date
Applying the same amount years later can still help, but by then, a large portion of interest may already have been charged.
Some homeowners hold windfalls in a savings account with the intention of making a larger repayment down the track. In many cases, this can be less effective than acting sooner. Depending on your interest rate and savings return, paying a lump sum earlier can reduce interest immediately or delaying repayment may increase total interest paid.
If access to funds matters, placing windfall money into an offset account can offer a middle ground, reducing interest while keeping cash available.
Review your home loan and refinance when appropriate.
Paying off your home loan sooner isn’t just about repayment habits; it also depends on whether your loan still suits your situation. Reviewing your home loan from time to time, and refinancing where it makes sense, can help keep you on track.
This isn’t about chasing the lowest rate at every turn. It’s about making sure your loan continues to work for you as your circumstances change.
But why does reviewing your home loan matter?
Many borrowers take out a home loan and leave it unchanged for years. Over that time, a lot can shift:
You may have built equity as your balance falls or property value rises
Your income, savings or financial stability may have improved
New loan products, rates or features may have become available
If your loan no longer reflects your current position, you could be paying more interest than necessary or missing out on features that support faster repayment.
So, how can refinancing help you pay off your loan sooner?
Refinancing may help reduce your loan over time by:
Securing a lower interest rate, which reduces the interest charged
Switching to a loan with more flexible features, such as extra repayments or an offset account
Moving to a shorter loan term, if your budget allows
Each option involves trade-offs, including fees and lender criteria. That’s why refinancing is usually about long-term benefit, not short-term gains. Borrowers often consider refinancing when:
They’ve built up meaningful equity
Their finances are stronger than when they first borrowed
A fixed rate is ending, or the loan features feel restrictive
They want a clearer path to becoming mortgage-free
Even if you don’t refinance straight away, a review can confirm whether your current loan still stacks up.
There’s no single “best” way to pay off a home loan faster. For most borrowers, it comes down to using the right combination of strategies, whether that’s consistent extra repayments, switching repayment frequency, making the most of an offset account, applying windfalls early, or reviewing your loan when circumstances change.
What matters is that your approach is sustainable, suits your cash flow, and works with your loan’s features and rules. Small, consistent changes can add up over time, especially when interest is working for you, not against you.
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Offset account vs redraw facility: Which can help you pay off your home loan sooner?
Offset accounts and redraw facilities are often compared because both can reduce the interest you pay on your home loan. While they can deliver similar outcomes on paper, they work differently and suit different borrowing behaviours.
The right option usually comes down to how you manage your cash flow and how often you need access to your money.
Key differences at a glance
Feature | Offset account | Redraw facility |
|---|---|---|
How it works | Reduces the balance interest is calculated on | Allows access to extra repayments already made |
Interest impact | Reduces interest daily while funds are held | Reduces interest once extra repayments are made |
Access to funds | Immediate | May require a request or involve delays or fees |
Best suited for | Ongoing savings and everyday cash flow | Occasional access to surplus funds |
Common loan type | Variable-rate loans | Variable-rate loans |
How each feature works
An offset account reduces the balance your home loan interest is calculated on, without changing your actual loan balance. The money in the offset account isn’t paid into the loan itself, but it’s taken into account when interest is worked out.
For example, if your home loan balance is $500,000 and you hold $40,000 in your offset account, interest is calculated on $460,000. Your loan balance stays the same, but the interest charged is lower.
A redraw facility works by letting you make extra repayments directly into your home loan. Those repayments reduce your actual loan balance. If your loan includes redraw, you may be able to access those extra funds later. Until you redraw them, the money forms part of the loan rather than sitting separately, as it does with an offset account.
How interest is affected
With an offset account, interest is reduced every day that money remains in the account. Because most home loans calculate interest daily, even short-term balances (such as salary deposits or savings buffers) can reduce interest while they’re there.
With a redraw facility, interest is reduced once the extra repayment is made, because the loan balance itself is lower. That benefit continues unless you redraw the funds. If you later withdraw money through redraw, your loan balance increases and interest is charged on the higher amount again.
Access to your money
Funds held in an offset account are generally available immediately. You can usually access the money in the same way as a normal transaction or savings account, making offsets useful for everyday spending, emergencies or irregular expenses.
Accessing money through a redraw facility can be more restricted. Some lenders require redraw requests, impose minimum redraw amounts, limit access to business hours, or charge fees. Because lender rules vary, access isn’t always guaranteed in the same way as an offset account.
What each option may suit
An offset account often suits borrowers who keep ongoing savings, have variable cash flow, or want to maintain an emergency buffer while still reducing interest. Many borrowers use their offset as a central account for income and expenses.
A redraw facility may suit borrowers who prefer to make extra repayments and leave the money in their loan, accessing it only occasionally. This can work well if you’re comfortable treating surplus funds as long-term repayments rather than everyday savings.
Loan types and availability
Both offset accounts and redraw facilities are most commonly available on variable rate home loans. Not all loans offer both features, and some lenders apply limits, fees or conditions. Fixed-rate loans may offer limited access to offset or redraw, or restrict how much you can use them.
Fees, access conditions and features vary by lender, and not all loans offer both options. Understanding how each works with your specific loan is key.
An Aussie Broker can help you understand which features are available on your loan and how they work in practice before you rely on them as part of a repayment strategy.
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Fixed vs variable home loans: What to check before making extra repayments
Before changing how you repay your home loan, it’s important to know whether your loan is fixed or variable. The rules around extra repayments, repayment frequency and access to features can differ significantly, and getting it wrong can be expensive.
Variable-rate home loans
Variable-rate home loans usually offer more flexibility if your goal is to pay off your loan sooner. Depending on the lender and product, you may be able to make unlimited extra repayments, switch to fortnightly repayments, or use features such as redraw or an offset account.
While variable loans are generally more flexible, features and limits still vary by lender. It’s worth checking your loan terms before changing your repayment strategy.
Fixed-rate home loans
Fixed-rate home loans provide certainty around repayments, but often restrict how much you can pay off during the fixed period. Common limitations include caps on extra repayments, break fees if you exceed the allowed limit, or limited or no access to offset or redraw.
Break fees are designed to cover the lender’s costs if the loan is paid down earlier than agreed. These fees can be substantial and are influenced by factors such as interest rate movements, the remaining fixed term and lender policy.
But why does checking your loan terms matter?
Extra repayments can reduce interest and shorten your loan term, but only if they don’t trigger unexpected costs. Before increasing repayments or changing repayment frequency, it’s important to understand whether your loan allows extra repayments, any caps, fees or conditions that apply, and how repayments are applied to your balance.
FAQs about paying off your home loan faster
Paying off a home loan sooner often raises the same practical questions for many Australian homeowners. Below are clear answers to some of the most common ones.
How can I pay off my home loan faster in Australia?
There’s no single strategy that suits every borrower, and options also vary based on lender rules and loan types, but common ways people reduce their loan sooner include:
Making regular extra repayments to reduce the loan balance
Using an offset account to cut interest while keeping savings accessible
Switching to fortnightly repayments to effectively make an extra month’s repayment each year
Reviewing and refinancing if your rate, term or features no longer suit your situation
For many borrowers, a combination of small, consistent changes can have the greatest impact over time.
Should I make extra repayments or use an offset account?
The right option depends on how much flexibility you want and what costs apply to your loan.
Extra repayments reduce your loan balance directly and can shorten your loan term. On the other hand, offset accounts reduce the interest charged while allowing you to access your money.
If access to savings is important, an offset account may suit you. If you’re comfortable leaving surplus funds in your loan, extra repayments may be more effective. Fees, interest rates and features vary by lender, so it’s important to compare both options based on your circumstances.
How often should I review my home loan?
A common guideline is to review your home loan every 12 to 24 months, or sooner if your circumstances change. A review can help you check whether:
Your interest rate is still competitive
Your loan features support faster repayments
Refinancing could reduce interest or loan length
Even if you don’t make changes, reviewing your loan can confirm that it still suits your goals.
Can I pay off a fixed-rate home loan early?
You may be able to, but fixed-rate loans usually come with conditions. Fixed-rate home loans often:
Limit how much you can repay during the fixed period
Charge break fees if you exceed those limits or repay early
Break fees can be significant and vary by lender, interest rate movements and the remaining fixed term. Always check your loan terms before making extra repayments on a fixed-rate loan.
Small changes can make a meaningful difference over time
Paying off your home loan sooner rarely comes down to one big decision. More often, it’s the result of small, consistent changes made early and maintained over time.
Strategies such as switching to fortnightly repayments, using an offset account effectively, and making regular extra repayments (even in modest amounts) can all help reduce the interest you pay and shorten your loan term, depending on your loan type, interest rate and lender rules.
What matters most is consistency and choosing options that fit your budget and cash flow, so they’re sustainable over the long term. There’s no one-size-fits-all approach, and the right mix of strategies may change as your circumstances evolve.
If you want a clearer picture of the potential impact on your own loan, start by running the numbers.
Use our extra repayments calculator to see how different repayment changes could affect your loan term and interest costs.
And if you want clarity on what’s realistic for your situation (including any limits, fees or trade-offs), an Aussie Broker can help you review your options and map out a practical path forward.
Book a free^ chat to see which small changes could make the biggest difference for you.
