How to Pay Off Your Mortgage Early in Australia: 6 Strategies That Work
On a $600,000 mortgage at 6.20% over 30 years, total interest paid is approximately $713,000 — more than the loan itself. Every extra dollar you repay early reduces this figure, because it immediately reduces the principal balance on which future interest is calculated. Paying an extra $200 per week saves $133,000 in interest and cuts 7 years off the loan term. Here are six concrete strategies Australians use to own their home sooner.
Strategy 1: Make Regular Extra Repayments
The most straightforward approach is to add a fixed amount to every regular repayment. Even modest amounts have a compounding effect because every dollar of principal repaid today eliminates future interest on that dollar for the life of the loan.
| Extra per week | Interest saved | Years cut | Loan paid off by |
|---|---|---|---|
| $0 (standard) | — | — | Year 30 |
| $100/week | $73,000 | 4.5 years | Year 25.5 |
| $200/week | $133,000 | 7 years | Year 23 |
| $500/week | $226,000 | 13 years | Year 17 |
| $1,000/week | $295,000 | 19 years | Year 11 |
These savings are guaranteed, after-tax returns equal to your mortgage interest rate — in 2026, that is approximately 6.2%. No investment can guarantee a risk-free 6.2% after-tax return. For most owner-occupiers, paying down the mortgage is the highest-return, lowest-risk financial move available.
Strategy 2: Switch to Fortnightly Repayments
Switching from monthly to fortnightly repayments is one of the simplest and most underrated mortgage strategies. Here's the mechanism: there are 26 fortnights in a year but only 12 months. If you pay half your monthly repayment every fortnight, you end up making 26 half-payments — the equivalent of 13 full monthly repayments, not 12.
On a $600,000 loan at 6.20%, switching to fortnightly repayments saves approximately $55,000 in interest and cuts 2.5 years off the loan with no change to your lifestyle or budget — just a change in payment frequency. Most lenders allow this at no cost on variable rate loans.
Important: Ensure the fortnightly amount is exactly half the monthly repayment, not the loan repayment simply recalculated as fortnightly. Some lenders set up "fortnightly" repayments that are actually 1/26th of the annual amount — which gives no benefit. Check with your lender.
Strategy 3: Use an Offset Account
Every dollar sitting in your offset account reduces the principal on which interest is calculated, dollar for dollar. If you have a $600,000 loan and $50,000 in an offset account, you pay interest on $550,000. At 6.20%, the daily interest saving is $8.49 — around $3,100 per year.
The offset account strategy works best when you funnel all income into the offset, pay all expenses via a credit card with a 55-day interest-free period, then pay the credit card in full from the offset account. This maximises the average daily offset balance. See our guide to offset accounts vs redraw facilities for a full comparison.
Strategy 4: Lump Sum Repayments
Tax refunds, work bonuses, inheritances, and proceeds from asset sales can all be directed to your mortgage as lump sum repayments. A $10,000 lump sum on a $600,000 loan at 6.20% in year 5 saves approximately $19,000 in total interest. The earlier in the loan term you make a lump sum repayment, the greater the saving — because it eliminates interest on that amount for the maximum remaining years.
Fixed rate loans may charge break fees for lump sum repayments above their extra repayment limit (typically $10,000–$20,000 per year). Variable loans generally allow unlimited extra repayments without penalty.
Strategy 5: Refinance to a Lower Rate
If you are paying a higher rate than necessary due to lender loyalty, refinancing can free up hundreds of dollars per month — which you then redirect as additional repayments. The Australian Competition and Consumer Commission found that existing borrowers pay on average 0.3%–0.5% more than new customers at the same bank. On $600,000, a 0.4% rate reduction saves $2,400 per year in interest — enough to materially cut your loan term if reinvested into the loan.
Refinancing costs approximately $1,000–$2,000 in discharge and application fees. This is typically recovered within 6–12 months of a better rate. Read our full guide to how to refinance your mortgage.
Strategy 6: Round Up Repayments
The simplest strategy with no budgeting effort: round your repayment up to the next hundred or thousand dollars. If your minimum repayment is $3,412 per month, round it to $3,500 or $4,000. The small extra amount — $88 to $588 per month — adds up significantly over decades without feeling like a sacrifice in any given month.
On a $600,000 loan at 6.20%, rounding up from $3,412 to $3,500 per month (an extra $88) saves $24,000 in interest and cuts 1.2 years off the loan.
Frequently Asked Questions
- Should I pay off my mortgage or invest the extra money?
- This depends on your mortgage rate, expected investment returns, and risk tolerance. At 6.2% mortgage rate, you need to consistently earn more than 6.2% after tax on investments to beat paying off the mortgage. Over long periods, a diversified share portfolio has historically returned 8–10% before tax — meaning investing often wins in the long run. But the mortgage payoff is guaranteed and risk-free. Most financial planners suggest a mix: some extra repayments plus some investing.
- Is there a penalty for paying off my mortgage early?
- Variable rate loans in Australia have no early repayment penalties. Fixed rate loans charge break costs if you pay out the loan during the fixed period. Break costs can be substantial — sometimes tens of thousands of dollars — so check your fixed rate loan contract before making large extra repayments or refinancing.
- Does paying extra into my loan reduce future minimum repayments?
- Generally no — your minimum monthly repayment stays the same regardless of extra repayments. Extra repayments reduce the principal balance (and therefore the interest charged each month), which means more of each future standard repayment goes to principal. Some lenders allow you to "redraw" the extra repayments, giving you flexibility if you need the funds later.
