Making even modest additional repayments on your home loan can save tens of thousands of dollars in interest and cut years from your loan term. Our free calculator lets you model any combination of extra monthly repayments and one-off lump sum payments — and shows you the exact interest saved and time cut from your loan, year by year.
Use the monthly option if you have recently received a pay rise or want to model a regular extra amount. Use the lump sum option to see the impact of a bonus, tax refund, or inheritance. Use both to model a combination. A year-by-year breakdown is available for any scenario.
Not all loans allow unlimited extra repayments. Fixed rate loans may have caps or break costs.
Book a free assessment to confirm what your loan allows and whether a variable rate loan with unlimited extra repayments suits your situation.
See how much time and interest you save by making additional repayments on your home loan.
| Year | Balance (min. repayments) | Balance (with extra) | Interest saved this year | Cumulative saving |
|---|
Unsure whether to make extra repayments or put funds in an offset account? Both strategies reduce interest, but they work differently. Our brokers can help you decide which approach suits your loan structure and goals.
Book a Free AssessmentEvery home loan has a minimum required repayment — the amount calculated to pay off your loan in full by the end of the agreed term at the agreed interest rate. Anything you pay above this minimum goes directly to reducing your principal (the outstanding loan balance).
Because interest is calculated daily on the outstanding balance, a lower principal means less interest charged the following month. This in turn means a larger portion of your next minimum repayment reduces principal further. The effect compounds over time: earlier principal reductions have more impact than later ones because they suppress interest charges across more remaining months.
An extra $500 per month on a $600,000 loan at 6.5% saves approximately $127,000 in interest and cuts over 7 years from the loan term. The same $500 added in year 25 of a 30-year loan saves a fraction of that — which is why starting extra repayments as early as possible has a disproportionate impact.
Stanford Financial
Why extra repayments work — and why early repayments work best
In the early years of a home loan, most of each repayment goes to interest — not reducing your debt
The following table shows indicative savings for various extra monthly repayment amounts on a $600,000 loan at 6.5% p.a. over 30 years.
| Loan | Rate / Term | Extra/mo | Interest Saved | Time Saved |
| $600,000 | 6.5% / 30 yr | $200/mo | ~$58,000 | ~3.3 years |
| $600,000 | 6.5% / 30 yr | $500/mo | ~$127,000 | ~7.3 years |
| $600,000 | 6.5% / 30 yr | $1,000/mo | ~$205,000 | ~12.5 years |
| $600,000 | 6.5% / 30 yr | $2,000/mo | ~$290,000 | ~19.0 years |
| $800,000 | 6.5% / 30 yr | $500/mo | ~$165,000 | ~7.0 years |
| $800,000 | 6.5% / 30 yr | $1,000/mo | ~$268,000 | ~12.0 years |
Indicative only. Assumes constant interest rate, minimum repayment unchanged, and extra repayments made consistently from month one. Use the calculator above to model your specific loan.
A lump sum applied to your loan at any point reduces the principal immediately, compressing interest charges across the remaining term. The earlier the lump sum is applied, the greater the saving.
| Loan | Rate / Term | Lump Sum | Interest Saved | Time Saved |
| $600,000 | 6.5% / 30 yr | $10,000 | ~$30,000 | ~1.5 years |
| $600,000 | 6.5% / 30 yr | $20,000 | ~$58,000 | ~3.0 years |
| $600,000 | 6.5% / 30 yr | $50,000 | ~$131,000 | ~7.0 years |
| $600,000 | 6.5% / 30 yr | $100,000 | ~$224,000 | ~13.0 years |
| $800,000 | 6.5% / 30 yr | $50,000 | ~$174,000 | ~6.5 years |
| $800,000 | 6.5% / 30 yr | $100,000 | ~$294,000 | ~12.5 years |
Indicative only. Lump sum assumed to be applied at the start of the loan. Actual savings depend on when during the loan term the lump sum is applied – earlier application yields greater savings.
Stanford Financial
What different extra repayment amounts actually save
$600,000 loan · 6.0% p.a. · 30-year P&I term · repayments starting from year 1
Pay rise strategy
When you receive a pay rise, keep your lifestyle the same and redirect the after-tax increase to your mortgage. Even a 2.5% raise on $90,000 adds ~$150/month extra.
Fortnightly strategy
Switching from monthly to fortnightly repayments means 26 payments per year instead of 24 — effectively one extra monthly repayment annually with no lifestyle change.
Round-up strategy
Round your repayment up to the nearest $500 or $1,000. A $3,597 repayment rounded to $4,000 adds $403/month extra — saving over $80,000 in interest with no budget pain.
One important check: Some fixed rate loans cap extra repayments at $10,000–$20,000 per year. If you're on a fixed rate and want to make larger payments, speak to a broker about whether switching to variable makes sense — or whether timing repayments around your fixed term expiry is the better approach.
Both extra repayments and an offset account reduce the interest charged on your home loan, but they work differently and the better choice depends on your loan structure and financial flexibility.
Extra repayments permanently reduce your loan balance. Once paid, the funds are inside the loan and can only be accessed via a redraw facility if your loan has one — and some lenders restrict or delay redraw. Extra repayments are ideal if you want to aggressively pay down debt and do not need access to the funds.
An offset account achieves a similar interest reduction, but the funds remain in a separate accessible account. You can withdraw them freely without restriction or approval. For borrowers who might need access to the money in an emergency, or for investment property borrowers where preserving interest deductibility matters, an offset account is generally preferable.
For owner-occupiers who are confident they will not need the funds: extra repayments and an offset account produce the same interest saving in dollar terms, assuming the same amount is applied consistently. The practical choice comes down to accessibility and loan structure. For investment borrowers: an offset account is almost always preferable because it preserves the tax deductibility of the loan interest. See our offset account calculator to compare both strategies side by side.
Most fixed rate home loans in Australia allow limited extra repayments which are typically capped at $10,000 per year, though this varies by lender and product. Exceeding the cap can trigger break costs, which can be substantial depending on current interest rates and time remaining on the fixed period.
Variable rate loans generally allow unlimited extra repayments at any time with no penalty. This is one of the key advantages of a variable rate loan for borrowers who intend to pay down their loan aggressively. Many borrowers choose a split loan structure that is part fixed for rate certainty, part variable for flexibility and direct extra repayments to the variable portion. A Stanford Financial broker can advise on which loan structure best supports your repayment strategy.
Each extra repayment reduces your principal balance by more than the minimum payment would. A lower principal means less interest is charged the following month, which means even more of the next repayment goes to principal. This compounding effect accelerates the pace at which your balance decreases, so the loan reaches zero earlier than the scheduled term.
More frequent repayments reduce the average daily balance on which interest is calculated, producing a marginally greater saving than the same annual amount paid monthly. Practically, the difference between fortnightly and monthly is modest unless the loan is large and the term is long. The most important factor is the total amount of extra repayments, not the frequency. Use our home loan repayment calculator to model fortnightly vs monthly repayments on your standard repayment.
It depends on your loan. If your loan has a redraw facility, you can typically access extra repayments you have made above the minimum. Some lenders offer this freely online; others require approval or charge a fee. Redraw access is not guaranteed, and some lenders can restrict it during certain market conditions. If you need ongoing access to the funds, an offset account is a more reliable structure.
Not automatically. Unless you ask your lender to recalculate your repayment based on the new lower balance, your minimum monthly repayment amount stays the same and the extra funds go toward reducing your principal faster. This is the standard approach and the one that delivers the interest and time savings shown in the calculator above. Some lenders allow you to reduce your repayment after a significant lump sum, but this reduces the time-saving benefit.
Extra repayments reduce your loan balance. If you refinance to a new lender, your new loan is based on the outstanding balance at the time of refinancing — which will be lower if you have made extra repayments. Any redraw amounts you had accumulated with the previous lender may need to be withdrawn before settlement. Your conveyancer or broker will guide you through this process.
This depends on the guaranteed return of paying down your mortgage versus the expected (but uncertain) return of investing. Paying down a 6.5% home loan delivers a guaranteed 6.5% after-tax return. Investment returns may be higher over the long term but carry risk and are not guaranteed. For most borrowers, a balanced approach — extra repayments plus investing — is appropriate. A financial adviser can help model the right split for your situation.
The best extra repayment strategy in the world is limited if your loan structure works against it. Fixed rate caps, redraw restrictions, and higher rates on loans without offset accounts all affect how much benefit you actually get from paying more. The right loan structure matters as much as the repayment amount.
Want to structure your loan to pay it off faster? Book your free assessment today — call us on 0483 980 002 or contact us online.
