Mozo guides

How to pay off your home loan faster and save money

Piggy bank.

Home loan debt is not something you want hanging over you any longer than necessary. Thankfully, there are plenty of things you can do to pay off your mortgage ahead of schedule. We’ve compiled a few handy tips below.

  • Make extra repayments
  • Increase your repayment frequency
  • Use a mortgage offset account
  • Avoid interest only repayments
  • Make sure you're getting the best rate

Make extra repayments

Making additional repayments is one of the best ways to get ahead on your mortgage, and the good news is that even a small amount can make a significant difference over the life of the loan.

This is especially true in the first few years. While the bulk of your scheduled repayments will go towards paying off the interest, every dollar above that amount will go directly to the principal. 

By chipping away at the principal you can reduce the amount of interest it will accrue, saving you money in the long run.

Not every fixed rate loan lets you make extra repayments, and the ones that do will most likely charge you for the privilege or apply annual limits. But if you’re considering a variable rate loan, you’ll find the ability to make free extra repayments is quite standard

Increase your repayment frequency

Increasing your repayment frequency from monthly to fortnightly (or weekly) can also work to your advantage, though this will depend on how your repayments are calculated in the first place.

If your lender halves the amount you pay on a monthly basis and charges it every two weeks, you could shave an extra month off your mortgage each year without putting too much of a dent in your finances. 

That’s because someone making monthly repayments of $2,000 can expect to pay back $24,000 over one year, while someone making fortnightly repayments of $1,000 will pay back $26,000.

Some lenders, however, calculate the ‘true’ fortnightly amount by taking your total annual repayments and dividing them by 26 (the number of fortnights in a year). If this is the case, switching to fortnightly repayments won’t make much of a difference.

Use a mortgage offset account

An offset account functions like a regular bank account, with the added benefit of reducing the balance on which your lender charges interest. The more money you have in your offset account, the less interest you’ll have to pay on your loan.

For example, if you have $50,000 in an offset account and you owe $300,000 on your mortgage, then you would only be charged interest on $250,000.

Just like a bank account you can have your salary deposited directly into the offset account. It will also come with a debit card for everyday purposes, such as ATM withdrawals and over the counter purchases.

Avoid interest only repayments

Switching from paying principal and interest to interest only can ease some of the stress of servicing a mortgage in the short-term, but it also means you’ll wind up paying more money over a longer period.

Unless your finances have taken a hit and you can’t get by without temporarily reducing the amount you pay each month, it’s a good idea to avoid switching to interest only repayments. The same applies for repayment holidays.

Make sure you’re getting the best rate

While the above steps can help you get ahead on your loan, one of the most important things you can do is review your interest rate every so often to make sure you’re getting the best possible deal.

This might involve sticking with your lender but switching to another offering of theirs. You might also have luck negotiating a lower rate (just make sure to familiarise yourself with rates offered by competitors as a bargaining chip).

If your current lender won’t budge, consider refinancing to a cheaper lender. While this might involve some fees and paperwork, it can be worth it in the long run if it means saving on interest.

For example, say you’re paying off a loan of $600,000 over 25 years with an interest rate of 3.00% p.a. If you were to switch to a rate of 1.88% p.a. (the current lowest variable rate among providers we track) and keep up the same repayments, you could pay off the loan nearly four years earlier.

To quickly see how much you could save by refinancing, use our switch and save calculator. And for an overview of current offers on the market, visit our home loan comparison page, or browse the selection below.

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 18 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Variable Home Loan 90

    Principal and Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.04% p.a. variable
    6.06% p.a.

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • The Better Home Loan Special Offer

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.14% p.a.

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Discount Variable Home Loan

    Owner Occupier, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    6.01% p.a.

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

Niko Iliakis
Niko Iliakis
Money writer

Niko Iliakis is a finance journalist at Mozo specialising in home loans, property and interest rate movements. With an eye for facts and figures, Niko deep-dives into topics to help readers understand key info and make more informed financial decisions. He is ASIC RG146 (Tier 2) certified for general advice.

* 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. You can change the loan amount and term in the input boxes at the top of this table. 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.

^See information about the Mozo Experts Choice Home Loan Awards

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