To suggest that there are only 14 or even 15 ways to pay off your home loan sooner is somewhat deceptive because countless factors can influence the duration and cost of your mortgage. However, this guide explores 30 comprehensive and actionable strategies—ranging from fundamental principles to advanced financial techniques—that will help you reduce your monthly obligations and shorten the term of your home loan.
1. Skip the Honeymoon Period
Beware of lenders bearing gifts. Many mortgage products offer an enticing introductory “honeymoon” interest rate—often significantly lower than the standard rate—only to revert to a much higher rate once the period ends. These deals may also include substantial exit fees if you attempt to refinance or pay off your loan early. Always calculate the long-term cost before committing to such a product. If the standard variable rate after the honeymoon period is above market rates, the initial discount may not be worth it. Learn more in our Variable Rate FAQ.
2. Make Extra Repayments by Assuming a Higher Rate
A healthy habit is to assume a higher interest rate when making repayments. For example, if your home loan is at 4.00% per annum, set up automatic repayments based on a 5.00% rate. This builds a buffer for future rate increases and effectively reduces the loan principal faster, shaving years off your mortgage. If rates do rise, you’ll already be prepared to manage the additional cost without financial strain. Read more about compound interest in our Education module.
3. Pay Your Loan Off Faster by Maximizing Contributions
The simplest way to pay off a home loan faster is to inject as much money into it as possible. Since interest is calculated daily on the outstanding balance, even small additional payments can have an exponential effect over time.
Example: A $400,000 loan at 5.00% interest over 25 years requires a monthly repayment of $2,338. Over the full term, you would pay $701,508 in total. However, if you increase your monthly repayment to $4,242 and clear the loan in 10 years, you would pay only $509,114—saving a staggering $192,394 in interest.
Early in the loan term, most of your repayments go toward interest rather than principal (a harsh reality of compound interest). The faster you reduce the principal, the less interest you pay over time.
4. Use a Credit Card Wisely with an Offset Account
While credit cards are often viewed as a financial trap, they can be leveraged as a powerful tool when used correctly. Many credit cards offer an interest-free period (typically 55 days), allowing you to delay payments while keeping your cash in an offset account.
This means that instead of immediately paying bills or expenses with cash, you charge them to a credit card and allow your money to sit in your mortgage offset account for an additional 55 days, reducing the daily interest accrued on your home loan. Be disciplined, however—always pay off your credit card in full before interest kicks in.
5. Make Fortnightly or Weekly Repayments Instead of Monthly
Switching from monthly to fortnightly repayments can significantly reduce the term of your home loan. Here’s why:
- There are 26 fortnights in a year but only 12 months. By paying half of your monthly repayment every two weeks, you effectively make 13 full payments annually instead of 12.
- More frequent payments mean less interest accumulates between payments, reducing the total interest paid over the loan’s lifespan.
Check our mortgage calculators to see a visual representation of the savings.
6. Consider a Loan Package for Extra Perks
Many banks offer financial packages that bundle together discounts and perks. These may include:
- Discounted home insurance
- Fee-free credit cards
- Complimentary financial advice sessions
- Fee-free transaction accounts
For larger loan amounts (often above $150,000), professional packages offer further discounts and rate reductions, though they may come with additional fees or lock-in periods.
7. Consolidate High-Interest Debt Into Your Mortgage
Many lenders allow borrowers to consolidate higher-interest debts (credit cards, personal loans, car loans) under the umbrella of their home loan. Since home loans typically carry lower interest rates (e.g., 5.00% vs. 18.00% for a credit card), this can lead to significant savings. Be cautious: while this strategy reduces interest, it extends the repayment period. To maximize benefits, continue making higher payments on the consolidated debt portion.
8. Split Your Loan: Fixed and Variable Rate Combination
A split loan allows you to divide your mortgage into both fixed and variable components, hedging against interest rate volatility.
Example: Example: 50% Fixed: Protects against rising interest rates for a set period. 50% Variable: Allows for extra repayments and benefits from rate cuts.
9. Cut Unnecessary Luxuries and Redirect Savings
Seemingly minor expenses add up quickly. By cutting discretionary spending (daily coffees, subscription services, luxury items), you could save $10,000+ annually—money better spent reducing your mortgage principal.
10. Stay Vigilant and Negotiate Regularly
Don’t let your mortgage run on autopilot. Regularly review your loan terms, interest rate, and lender policies. Many lenders offer rate reductions for loyal borrowers—if you ask. Partnering with a broker ensures someone is negotiating better rates on your behalf.
11. Use a 100% Offset Account
A 100% offset account can be a game-changer, as every dollar in this account directly reduces the balance on which interest is charged. Instead of earning interest, any money you have in your offset account works to offset the interest you are paying on your home loan. For example you may have a mortgage of $300,000 at 5.00 percent and an offset account with $50,000 in it earning 3 percent. This means that $250,000 of your loan is accruing interest at 5.00 percent but the rest is accruing interest at just over 1 percent (5.00 percent on your loan less the 3 percent the $50,000 in your offset account is earning). Imagine how much you can save!
Of course, the best sort of offset account pays the same rate as your loan (100 per cent offset).
Example: If you owe $300,000 at 5.00% interest but have $50,000 in an offset account, you’ll only be charged interest on $250,000—saving thousands in interest annually.
12. Make the First Payment Before It ’s Due
Most new loans allow a grace period before the first repayment. If possible, make your first instalment immediately upon settlement. This ensures you’re always ahead on repayments. Every little bit counts.
13. Ensure Your Loan is Portable
If you plan to move in the future, check whether your loan is portable—this allows you to transfer your mortgage to a new property without incurring significant discharge and re-establishment fees.
14. Consider Smaller Lenders for Better Rates
The “big four” banks often charge a premium for brand recognition. Smaller lenders may offer lower rates and fewer fees, though they may lack extensive branch networks and advanced digital banking features.
15. Take Advantage of Professional Discounts
Certain professions, including doctors, lawyers, and police officers, may qualify for discounted mortgage rates or fee waivers. Always ask your lender about profession-specific perks.
16. Make Lump-Sum Payments When Possible
Any unexpected financial windfall—such as a work bonus, tax refund, or inheritance—should go directly into your mortgage rather than being spent frivolously. Since interest is calculated daily on the outstanding loan balance, a lump-sum payment can substantially reduce the principal and minimize long-term interest costs. Even a single lump-sum payment of $5,000 early in your loan can save you thousands in interest over the life of the loan.
17. Redraw Facilities: Use With Caution
Many home loans offer redraw facilities, allowing you to withdraw extra repayments if needed. While this feature provides flexibility, it should be used strategically.
- Redrawing for emergencies or investments is justifiable.
- Avoid using the redraw facility for lifestyle expenses (e.g., holidays, electronics).
Keeping extra repayments untouched ensures you continue to reduce interest costs rather than resetting your loan balance.
18. Use Government Schemes and Grants
Depending on your location, you may be eligible for first-home buyer grants, stamp duty concessions, or low-interest loan schemes. In Australia, for instance, first-home buyers can access:
- First Home Owner Grant (FHOG)
- First Home Loan Deposit Scheme (FHLDS)
- Stamp duty exemptions and concessions
- Leveraging these programs can significantly reduce your mortgage burden from the outset.
19. Rent Out a Room or Short-Term Let
If your property has a spare bedroom or an attached unit, consider renting it out. Platforms like Airbnb allow short-term letting, while a long-term tenant can provide a steady income stream. Applying even a modest rental income of $200 per week ($10,400 per year) toward your mortgage can significantly shorten the loan term. many big borrowers accept the rent from a single room as income against your loan.
20. Keep Your Loan Term Shorter from the Start
When choosing a mortgage, many borrowers opt for the standard 25- or 30-year term to minimize monthly repayments. However, shortening your loan term to 15 or 20 years from the outset forces you to make higher repayments, ensuring your loan is paid off sooner and significantly reducing interest costs.
A shorter-term mortgage typically comes with a lower interest rate as well, providing double the benefit.
21. Invest in Energy Efficiency to Cut Expenses
Utility bills can drain your finances, making it harder to allocate extra funds toward mortgage repayments. Investing in solar panels, LED lighting, and high-efficiency appliances can lower your electricity and water bills, allowing you to redirect those savings into your mortgage.
22. Refinance at the Right Time
Refinancing can reduce your interest rate and provide more flexible loan features. However, timing is key:
- Check if your lender will match a lower competitor rate before refinancing.
- Consider the cost of switching (exit fees, new establishment fees).
- If refinancing, ensure the new loan offers offset accounts, redraw facilities, and lower fees.
Refinancing even 0.50% lower might potentially save hundreds of thousands. Check in with us for real-world examples.
23. Make One Extra Repayment Per Year
Even if you can’t commit to fortnightly repayments, making just one extra repayment annually can have a substantial impact. One extra repayment a year will save tens of thousands and shave (on average) around 3 years off your mortgage.
24. Live Below Your Means (Temporarily)
A few years of modest living can shave a decade or more off your mortgage.
- Drive a used car instead of financing a new one.
- Cut down on restaurant dining and takeout.
- Avoid impulse purchases and high-cost discretionary spending.
The savings redirected to your mortgage will compound dramatically over time.
25. Offset Salary Payments to Your Mortgage
If your lender allows direct salary deposits into an offset account, take advantage of it. This ensures every dollar of your salary is reducing your mortgage balance before you spend it.
26. Switch to a Mortgage with Lower Fees
In other words: refinance when appropriate. Some lenders charge monthly account-keeping fees, redraw fees, or annual package fees that add up over time. Look for a loan with:
- No monthly fees
- Low (or no) annual fees
- Unlimited extra repayments without penalty
Even $400 in annual fees equals around $10,000 lost over 25 years—money that should have gone into your mortgage (amount varies, as does the fees).
27. Avoid Interest-Only Loans Unless Absolutely Necessary
Interest-only loans may seem appealing due to their lower initial repayments, but they don’t reduce your loan principal. If you must take an interest-only loan for investment purposes, ensure you have a clear exit strategy before the interest-only period ends. Interest-Only loans are used as part of a forward wealth strategy, but they’re often used for temporary relief.
28. Leverage Tax Deductions for Investment Properties
For property investors, negative gearing and tax deductions on interest payments can create cash flow that can be used to accelerate mortgage repayments. Speak to an accountant to ensure you’re maximizing all available deductions.
29. Consider a Side Hustle to Increase Your Repayments
If your current salary doesn’t allow for significant extra repayments, consider increasing your income:
- Freelancing or consulting
- Tutoring or coaching
- Selling unused items online
- Offering Airbnb experiences
Even an extra $500 per month dedicated to your mortgage can reduce your loan term significantly.
30. Maintain an Emergency Fund to Avoid Mortgage Stress
While it’s important to make extra repayments, never deplete your savings entirely. Keeping three to six months’ worth of expenses in an emergency fund ensures you don’t fall behind on repayments if unexpected expenses arise.
Talk to Your Broker
Paying off your home loan sooner isn’t just about discipline — it’s about leveraging every financial tool available. By applying even a handful of these strategies, you can save tens (or even hundreds) of thousands of dollars over your loan’s lifetime.
Remember, the sooner you own your home outright, the more financial freedom you’ll enjoy.
Start today – your future self will thank you. Call us!
