Pay your home loan off faster. Save mortgage interest. These are just some of the perks of making extra repayments for your home loan. Find out how much time and money you can save with our handy extra repayments calculator.
Most, if not all, variable home loans let you make extra repayments against your mortgage principal – usually for free. These extra repayments count towards the initial loan amount you borrowed, thus eliminating your debt faster.
This also reduces your interest payments over time, since the principal used to calculate your interest gets smaller, faster.
Mozo’s extra repayments calculator estimates how much time and money you could save on your home loan by putting more cash into your mortgage repayments.
To use the calculator, you’ll need to know:
The size of your home loan.
The term of your home loan.
Your home loan interest rate.
You can also include an introductory interest rate if your home loan has one.
Enter these details into the boxes in the calculator. Now it’s time to experiment. You can make extra repayments either by adding extra money to your monthly payments or as a lump sum. Plug these numbers into the calculator to see how they could affect your long-term mortgage costs.
If your home loan lets you make extra repayments, it’s usually just a matter of increasing the size of your mortgage repayments. For example, instead of transferring $2,000 a month into your mortgage account, you transfer $2,050.
You could also transfer a lump sum payment the same way, i.e. putting your tax return or a work bonus toward your mortgage.
How much money extra repayments save you depends on your initial loan amount, loan term, and interest rate. But let’s take a look at some home loan statistics to make an estimate.
The average mortgage size in Australia is $610,000, and the average variable home loan interest rate in Mozo’s database is 6.85% p.a. (for owner-occupiers with LVRs < 80%) as of January 2024. Let’s say you have a loan term of 25 years.
According to Mozo’s extra repayment calculator, paying an extra $100 monthly on this home loan for the first ten years could save $34,484 in total interest and discharge the mortgage 10 months early. Not too bad!
A home loan redraw facility is a special account attached to your home loan that lets you dip back into extra repayments you’ve already made.
Pulling funds from a redraw can sometimes come with fees. It will also increase your loan size since you’ve pulled the funds from your mortgage, thus increasing your interest payments.
Extra repayments are a standard feature for variable home loans, not fixed ones. It’s unlikely you make extra repayments during your fixed home loan term.
Adding a little more money to your mortgage repayments in the short term might be annoying, but the time and interest you save could be worthwhile. Essentially, extra repayments can get you debt-free faster and cheaper.
Our extra repayments calculator makes it easy to see how this works.