Home loans that allow unlimited extra repayments

Couple selecting a home loan.

For most people, paying off a mortgage will be a decades-long task. While the prospect can seem daunting, there are things borrowers can do to shorten the life of their loan — and save on interest in the long run. One of those things is making extra repayments.

The ability to make unlimited extra repayments is quite standard on variable rate home loans. It’s typically fixed rate loans that place restrictions on how much extra borrowers can pay, either by capping amounts or forbidding them altogether. 

If your home loan allows extra repayments, you might be wondering if it’s a good idea to take advantage of that feature. We explore some of the main advantages below.

Why should you make extra repayments on your home loan?

In the early stages of a mortgage, the bulk of your repayments go towards paying the interest, rather than the principal amount.

However, any extra repayments you make chip away at the principal, which in turn reduces the interest charged on it. 

To illustrate how much you could save, say you’re paying off a $500,000 home loan with a rate of 3.50% p.a. over 25 years. By increasing your usual monthly repayments by $100, you could shave one year and five months off the life of your loan and save around $16,700 in interest. 

When is it not a good idea to make extra repayments?

If you have the means, paying down your loan ahead of schedule seems like a no brainer. After all, who wants mortgage debt hanging over their heads for longer than necessary? But there are times where making extra repayments on your home loan might not be the best decision.

If you have other large debts, for example, it might be wise to direct any spare cash towards those instead. Credit cards and personal loans tend to attract a higher interest rate than home loans, and some people might benefit from eliminating those debt sources first.

Variable rate loans with uncapped extra repayments

Whether you’ve got a lump sum you want to put towards your mortgage or you just want to top up your usual repayments, there are plenty of loan options that might suit. 

Below, we’ve compiled a selection of noteworthy home loans that let owner occupiers make unlimited extra repayments without penalty.

loans.com.au Smart Booster Home Loan
  • 1.85% p.a. variable rate (2.21% p.a. comparison rate*) for first 2 years
  • Offset account option available
  • No application or service fees

Available for borrowers with an LVR below 80%. The Smart Booster Home Loan comes with an introductory variable rate of just 1.85% p.a. (2.21% p.a. comparison rate*), which is available for the first two years before reverting to 2.25% p.a. (2.21% p.a. comparison rate*). Along with free extra repayments, there is a free redraw facility, and you can access an offset account for an additional 0.10% p.a. Fees include $220 valuation fee, $300 settlement fee, $300 discharge fee, and $250 discharge documentation fee if loan doesn't go to full term.

UBank UHomeLoan Discount Offer
  • 2.09% p.a. variable rate (2.09% p.a. comparison rate*)
  • No annual fees
  • Free redraw facility
Find out more

Backed by NAB, UBank offers both competitive rates and the security of a big bank. Borrowers with an LVR below 80% can take advantage of rates as low as 2.09% p.a. (2.09% p.a. comparison rate*) and there is no cap on the amount of extra repayments you can make each year. And if you feel those extra repayments would be better served back in your pocket, a free redraw facility is also available. No upfront or ongoing fees.

Athena Liberate Variable Home Loan
  • Low rates from 1.99% p.a. (1.93% p.a. comparison rate*)
  • Automatic discounts as loan is paid off
  • Zero ongoing or upfront fees

The AcceleRATES Variable Home Loan from online lender Athena leaves little off the table. For starters, owner occupiers with a 70-80% LVR can receive rates as low as 1.99% p.a. (1.93% p.a. comparison rate*), but there is also a range of features borrowers will appreciate including free extra repayments and access to a redraw facility and offset account. On top of that, borrowers will also receive automatic discounts as they pay off their loan. No upfront or ongoing fees.

Nano Variable Home Loan
  • Low rates from 1.99% p.a. (1.99% p.a. comparison rate*)
  • Zero upfront or ongoing fees
  • Offset sub account
Find out more

Available for borrowers with an LVR below 75%. This offer for refinancers from Nano, a new entrant in the digital lending space, sports a 1.99% p.a. variable rate (1.99% p.a. comparison rate*), along with a range of features to help borrowers save on interest. Chief among them is the ability to make free extra repayments, but you’ll also get an offset sub account with an attached Nano Visa debit card for everyday spending. No upfront or ongoing fees.

86 400 Neat Home Loan
  • Variable rates from 1.89% p.a. (1.90% p.a. comparison rate*)
  • No ongoing fees
  • Free extra repayments and redraws
Find out more

This offering from online lender 86 400 comes with a 2.09% p.a. variable rate (2.10% p.a. comparison rate*), available to those with a 70-80% LVR. And with no limit to how much extra you can repay, diligent borrowers will have plenty of opportunity to pay off their loan ahead of schedule. A redraw facility is also available in case you want to retrieve those extra funds. Fees include $250 settlement fee, $300 discharge fee.

Visit our home loans hub to compare home loans currently on the market.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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