To pay off a mortgage faster, reduce the interest charged and direct more money to principal without weakening your emergency position. Extra repayments, a well-used offset account, a suitable repayment frequency and a genuinely lower-cost loan can help, but loan terms, fees and personal cash flow matter.
Start with the current balance, rate, remaining term and repayment rules. Then model one change at a time. A strategy that saves interest is not useful if it creates expensive short-term debt or leaves no buffer for essential costs.
1. Check your current loan before changing anything
Record:
- the current balance and interest rate;
- the remaining loan term;
- the minimum repayment and payment frequency;
- whether the rate is fixed, variable or split;
- extra-repayment limits and fees;
- offset and redraw rules;
- annual, package and account fees; and
- any fixed-rate break cost or discharge cost.
This baseline lets you compare the actual interest and time saved. Check the credit contract and current lender statement rather than relying on a generic online rule.
2. Make extra repayments that reduce principal
Paying more than the required amount generally reduces the balance on which future interest is calculated. Regular additions can be easier to sustain than occasional large payments.
Possible approaches include rounding each repayment up, adding a fixed amount on payday or directing part of a bonus, tax refund or other surplus to the loan. Confirm that the lender applies the money to the loan and that any fixed-rate extra-payment cap is not exceeded.
Keep a realistic emergency reserve. Paying every spare dollar into a loan and then using a high-rate credit card for an unexpected bill can undermine the interest saving.
3. Understand fortnightly repayments before switching
There are 26 fortnights in a year. Paying half a monthly repayment every two weeks produces 13 monthly-equivalent payments over a year, rather than 12. This can reduce principal faster.
However, not every lender calculates a fortnightly repayment in the same way. Ask whether the amount is exactly half the monthly repayment, how interest is calculated and whether payments are credited immediately. Merely splitting the same annual amount into smaller instalments may create a smaller benefit than expected.
4. Use an offset account deliberately
An offset account is a transaction account linked to a mortgage. Its balance reduces the loan amount used to calculate interest. For example, a $500,000 loan with $20,000 in a 100% offset is generally charged interest on $480,000 while that balance remains.
An offset can be useful where the borrower maintains meaningful savings and wants ready access. It may not be cost-effective if the linked loan has a higher rate or package fee and the usual offset balance is low. Compare the expected interest saving with every additional cost.
Check whether the account is a genuine 100% offset, whether it applies to the relevant loan split and whether multiple accounts can be linked. An ordinary savings account with the same lender is not automatically an offset.
5. Compare offset and redraw carefully
Extra repayments go into the loan. A redraw facility may allow access to some of those extra repayments later, subject to the contract. An offset is a separate transaction account whose balance reduces interest.
Important differences can include:
- access conditions and withdrawal delays;
- minimum and maximum redraw amounts;
- fees and linked-account costs;
- whether the lender can change access rules;
- treatment if the loan is in arrears or hardship; and
- possible tax consequences when the property is or may become an investment.
Tax treatment can depend on how borrowed or redrawn money is used. Obtain registered tax advice before moving substantial funds where a property has an investment purpose or may have one later.
6. Keep repayments higher after a rate reduction
If the lender reduces the rate and cash flow permits, keeping the repayment at its previous level can direct more money to principal. Confirm the amount is above the required minimum and is accepted without penalty.
Do not assume rates will remain lower. Maintain a buffer for future changes and review the strategy if income or essential expenses change.
7. Review the interest rate and fees regularly
Compare the current loan with genuinely similar products. Look at the comparison rate, ongoing fees, repayment flexibility, offset or redraw costs and the remaining loan term—not just the advertised rate.
You can ask the current lender whether a more competitive rate or suitable product is available. A lower rate without switching costs may improve the position, but check whether changing products affects features or creates a fee.
8. Refinance only when the total result is better
Refinancing can reduce interest, but it is not automatically a faster-payoff strategy. Calculate:
- the new rate and fees;
- discharge, application, valuation and settlement costs;
- any fixed-rate break cost;
- possible lenders mortgage insurance or low-equity cost;
- the time needed to recover switching costs; and
- total interest using the same remaining term.
Extending a loan back to 25 or 30 years can lower the required repayment while increasing total interest and delaying debt-free ownership. Compare the proposed loan using a term close to the years remaining, unless a longer term is deliberately chosen for a reason understood by the borrower.
Use the separate guide to refinancing traps before switching.
9. Direct windfalls without creating a tax or cash-flow problem
A bonus, refund, inheritance or asset-sale proceeds may reduce a mortgage materially. Before making a large payment, consider:
- tax, legal or estate obligations;
- near-term household expenses;
- higher-rate debts;
- emergency savings;
- fixed-loan repayment limits; and
- whether offset access is more suitable than permanently reducing the loan.
Where the amount is significant, obtain appropriate tax, legal or financial advice.
10. Avoid adding new debt to the mortgage without a plan
Consolidating a credit card, personal loan or renovation expense into a mortgage may reduce the interest rate but can extend the debt over many years. If a shorter debt is added to the home loan, calculate the total cost and consider maintaining a repayment schedule that clears that portion promptly.
The home secures the enlarged loan. Missed repayments can put the property at risk. Debt consolidation should not be used to create new spending capacity without addressing the underlying budget.
11. Prioritise higher-cost debt while protecting the home loan
Where credit-card or other unsecured debt has a much higher rate, directing all surplus to the mortgage may not be the lowest-cost sequence. Compare rates, fees, tax treatment and minimum repayments, and keep every required payment current.
If repayments are becoming difficult, do not increase voluntary mortgage payments at the expense of food, utilities or required debts. Contact the lender’s hardship team early. Free financial counselling is available through the National Debt Helpline.
12. Review interest-only and fixed-rate periods before they end
An interest-only repayment does not reduce principal during the interest-only period. When it ends, principal-and-interest repayments can rise because the balance must be repaid over the shorter remaining term.
Model the future repayment early. If the loan permits extra repayments, gradually increasing payments before the change may reduce the balance and test affordability. Fixed-rate borrowers should also review the reversion rate, new repayment, features and break-cost implications before taking action.
Worked example: the importance of assumptions
Suppose a borrower has a $500,000 principal-and-interest loan with 25 years remaining. An extra $200 each month will generally reduce the balance sooner and save interest, but the exact result depends on the rate, how the lender credits payments and whether the rate changes.
A calculator result is an estimate, not a prediction. Use the current contract figures, test more than one rate scenario and confirm the lender’s repayment rules before relying on the projected date.
A practical annual mortgage review
- Confirm the balance, rate, term and minimum repayment.
- Review offset or redraw balances and access rules.
- Check whether annual fees still justify the features.
- Compare like-for-like rates and total costs.
- Test one affordable extra-repayment amount.
- Keep an emergency buffer and required insurances.
- Review fixed or interest-only expiry dates.
- Record a target and reassess it when circumstances change.
Frequently asked questions
Is weekly or fortnightly always better than monthly?
No. The outcome depends on the total annual amount, timing and lender calculation. Paying half the monthly amount every fortnight creates an extra monthly-equivalent payment each year, but confirm how your lender applies it.
Should I put savings in offset or directly into the loan?
Both can reduce interest. Offset may provide more flexible access, while an extra repayment reduces the loan balance and may be available only through redraw rules. Compare fees, discipline, access needs and tax implications.
Can I make unlimited extra repayments?
Not always. Variable loans often allow extra repayments, while fixed loans may impose caps or break costs. Check the credit contract and ask the lender.
Does refinancing reset the mortgage?
The old loan is replaced, and the new term is selected as part of the refinance. Choosing a longer term can delay payoff and increase total interest even when the rate is lower.
What if I cannot afford the minimum repayment?
Contact the lender’s hardship team early rather than making extra payments. A hardship variation may be available, and the National Debt Helpline offers free financial counselling.
Official guidance and next steps
- Moneysmart: pay off your mortgage faster
- Moneysmart: mortgage offset accounts
- Moneysmart: switching home loans
- National Debt Helpline
- Discuss a home-loan review with GQ Finance
This article provides general information only and does not take into account your objectives, financial situation or needs. Interest rates, fees, repayment rules, offset and redraw conditions, tax treatment, hardship options and refinancing outcomes vary. Review the credit contract and obtain independent legal, tax or financial advice where appropriate. GQ Finance Pty Ltd ABN 19 827 707 218. Australian Credit Representative No. 523333.
