Extra Mortgage Payments Calculator

Why Extra Mortgage Repayments Work So Well

The reason extra repayments have such a powerful effect on your home loan comes down to how mortgage interest is calculated. Interest on most Australian home loans is calculated daily based on your outstanding loan balance. This means that every dollar you pay off your principal reduces the amount of interest charged the very next day.

When you make extra repayments, you reduce your principal faster than scheduled. A lower principal means less interest is charged each month. Less interest means more of each future repayment goes toward principal. This creates a compounding effect that accelerates as you go — the more you pay down, the faster the balance drops.

Over a 30 year loan, the total interest paid can exceed the original loan amount. By making consistent extra repayments, you can dramatically reduce this figure and own your home outright years ahead of schedule.

Use our Amortization Calculator to see your full repayment schedule month by month.

How Much Could You Actually Save? Real Examples

To understand the impact of extra repayments, here are some illustrative examples based on common Australian home loan scenarios. These are estimates based on standard calculations and assume a fixed interest rate throughout.

Example 1 — $500,000 loan at 6% over 30 years Standard monthly repayment: approximately $2,998 Extra repayment of $200 per month: saves approximately $57,000 in interest and cuts around 4 years from the loan term Extra repayment of $500 per month: saves approximately $112,000 in interest and cuts around 7 years from the loan term

Example 2 — $700,000 loan at 6% over 30 years Standard monthly repayment: approximately $4,197 Extra repayment of $300 per month: saves approximately $88,000 in interest and cuts around 5 years from the loan term Extra repayment of $700 per month: saves approximately $159,000 in interest and cuts around 8 years from the loan term

Example 3 — $400,000 loan at 6% over 25 years Standard monthly repayment: approximately $2,577 Extra repayment of $150 per month: saves approximately $34,000 in interest and cuts around 3 years from the loan term Extra repayment of $400 per month: saves approximately $70,000 in interest and cuts around 6 years from the loan term

These examples illustrate that you do not need to make large extra repayments to see meaningful savings. Even modest additional amounts, applied consistently over time, can save tens of thousands of dollars and years off your loan.

Use this calculator to model your own loan with your specific balance, rate, and extra repayment amount.

Extra Repayments on Variable vs Fixed Rate Loans in Australia

Not all Australian home loans treat extra repayments the same way. Understanding how your loan type affects your ability to make extra repayments is important before you start.

Variable rate loans Most variable rate home loans in Australia allow unlimited extra repayments at any time without penalty. This makes them the most flexible option for borrowers who want to pay down their loan faster. Many variable loans also include a redraw facility, which allows you to access any extra repayments you have made if you need the money back later.

Fixed rate loans Fixed rate home loans in Australia typically limit how much extra you can repay during the fixed period. Many lenders cap extra repayments at $10,000 per year on fixed rate loans. If you exceed this limit, you may be charged a break cost. Always check your loan contract or ask your lender before making large extra repayments on a fixed rate loan.

Split loans Some Australian borrowers have a split loan — part fixed and part variable. In this case, you can generally make unlimited extra repayments on the variable portion while being subject to limits on the fixed portion.

Offset accounts If your loan has an offset account, keeping savings in your offset account has a similar effect to making extra repayments — it reduces the balance on which interest is calculated. However, the money remains accessible, unlike extra repayments which may require a redraw to access.

If your current loan does not have these features, our Mortgage Refinance Calculator can help you see if switching loans makes sense

Practical Strategies to Make Extra Mortgage Repayments in Australia

If you want to pay off your home loan faster but are not sure how to find the extra money, here are some practical approaches that Australian homeowners use.

Switch to fortnightly repayments Instead of making one monthly repayment, split it in half and pay fortnightly. Because there are 26 fortnights in a year but only 12 months, you end up making the equivalent of 13 monthly repayments per year instead of 12. This one simple change can cut years off your loan without feeling like a significant financial sacrifice.

Put tax refunds toward your loan Rather than spending your annual tax refund, put it directly onto your mortgage as a lump sum extra repayment. Even a $2,000 to $5,000 refund applied to your loan each year can make a meaningful difference over time.

Apply pay rises to your mortgage When you receive a salary increase, consider directing some or all of the extra take-home pay toward your mortgage rather than increasing your lifestyle spending. Since you were already living on your previous income, this approach lets you build wealth without feeling the pinch.

Make a lump sum repayment when you can Bonuses, inheritances, or proceeds from selling assets can all be applied to your mortgage as lump sum repayments. A single $10,000 or $20,000 extra payment can save years off your loan term depending on where you are in your loan.

Round up your repayments If your minimum monthly repayment is $2,847, round it up to $3,000. The extra $153 per month costs little in day-to-day terms but compounds into significant savings over a 25 or 30 year loan.

Offset Account vs Extra Repayments — Which is Better?

This is one of the most common questions Australian home loan borrowers ask, and the answer depends on your situation.

How an offset account works An offset account is a transaction account linked to your home loan. The balance sitting in the account is offset against your loan balance when interest is calculated. For example, if you have a $600,000 loan and $50,000 in your offset account, you only pay interest on $550,000. The money in your offset account remains fully accessible — you can spend it at any time.

How extra repayments work Extra repayments go directly onto your loan balance and permanently reduce what you owe. This means you pay less interest from that point forward. However, to access extra repayments, you generally need to use a redraw facility, which some lenders restrict or charge fees for.

Which is better? If you have a fully featured variable rate loan with an offset account, keeping savings in the offset account gives you the same interest-saving benefit as extra repayments while keeping your money accessible. This is generally the more flexible option.

If your loan does not have an offset account, or if you prefer the discipline of locking money away, making extra repayments directly onto the loan achieves the same interest-saving result. The key is to do one or the other — keeping savings in a low-interest savings account while paying only the minimum on your mortgage is the least efficient approach.

Use our Home Equity Calculator to track how your equity grows as you make extra repayments

Frequently asked questions

How much can I save by making extra mortgage repayments?

The amount you save depends on your loan balance, interest rate, loan term, and how much extra you repay each month. On a $500,000 loan at 6% over 30 years, an extra $300 per month could save over $70,000 in interest and cut around 5 years from your loan. Use this calculator to model your specific situation.

Is it better to make extra repayments or put money in an offset account?

Both strategies reduce the interest you pay on your home loan. An offset account gives you more flexibility because your money remains accessible without needing to apply for a redraw. Extra repayments are more permanent but may be harder to access. If your loan has an offset account, using it is generally the more flexible option. If it does not, extra repayments are the next best strategy.

Can I make extra repayments on a fixed rate home loan in Australia?

Most fixed rate loans in Australia limit extra repayments to $10,000 per year. Exceeding this limit may trigger a break cost. Always check your loan terms or ask your lender before making extra repayments on a fixed rate loan. Variable rate loans generally allow unlimited extra repayments.

Should I make extra repayments or invest the money instead?

This depends on your interest rate versus your expected investment return. If your mortgage rate is 6% and you believe you can earn more than 6% after tax by investing, investing may provide a better return. However, paying off your mortgage is a guaranteed, risk-free return equal to your interest rate, while investment returns are never guaranteed. Many Australian financial advisers suggest a balanced approach — making some extra repayments while also building an investment portfolio.

What is a redraw facility and how does it relate to extra repayments?

A redraw facility allows you to access extra repayments you have made on your home loan if you need the money back. Not all loans include a redraw facility, and some lenders charge fees or place restrictions on how and when you can redraw. Check your loan conditions to understand what applies to your loan.

How does making fortnightly repayments differ from extra repayments?

Fortnightly repayments work by making half your monthly repayment every two weeks. Because there are 26 fortnights in a year, you end up making 13 monthly repayment equivalents instead of 12. This is a simple and effective way to make extra repayments without requiring additional money — just a change in frequency.

Will making extra repayments affect my credit score?

No. Making extra repayments on your mortgage does not negatively affect your credit score. In fact, reducing your debt level over time can be positive for your overall financial profile.

Start Paying Off Your Home Loan Sooner

Every extra dollar you put toward your mortgage today saves you multiple dollars in interest over the life of your loan. Whether you start with an extra $100 a month or a one-off lump sum, the impact adds up faster than most people expect.

Use this calculator to find your number, then explore our other free tools to build a complete picture of your home loan strategy. Try the Amortization Calculator