Start Paying Off a Mortgage Faster in 7 Easy Steps

If your mortgage repayments feel heavy lately, you’re not imagining it. The Reserve Bank lifted the cash rate to 4.6% on 29 September, its fourth rise this year (here’s our take on what it means). So it’s no surprise “paying off a mortgage faster” has jumped to the top of plenty of Brisbane to-do lists.

You don’t need a lottery win to make a real dent. A few smart, steady moves can shave years off your loan and save you tens (sometimes hundreds) of thousands in interest. Let’s walk through how.

Why Paying Off a Mortgage Faster Makes a Big Difference

Here’s a real-world example we’ll use throughout this article: a $600,000 loan at 6.5% p.a. over 30 years. The minimum repayment is about $3,792 a month. In the very first month, around $3,250 of that goes to interest and only about $540 actually reduces the loan. Over the full 30 years, you’d pay roughly $765,000 in interest. Yes, that’s more than you borrowed in the first place.

That’s exactly why small extras early on punch above their weight. Every dollar you knock off the balance today is a dollar the bank can’t charge interest on for the next few decades. As Moneysmart points out, extra money paid in those early years does the heavy lifting.

7 Ways to Start Paying Off Your Mortgage Faster

1. Pay a little extra, every time

The simplest trick, and still one of the best. Most variable loans let you pay more than the minimum without penalty. On our $600,000 example, an extra $200 a month pays the loan off about 4 years sooner and saves around $122,000 in interest. Bump it to $500 a month and you’re mortgage-free roughly 8 years early. Set it up as an automatic payment so you never have to think about it.

2. Switch to fortnightly repayments

There are 26 fortnights in a year but only 12 months. Pay half your monthly amount every fortnight and you sneak in the equivalent of one extra monthly repayment each year, without really feeling it. In our example, that cuts almost 6 years off the loan and saves about $176,000. One catch: check your lender halves the monthly amount. Some divide the annual total by 26, which doesn’t get you ahead at all.

3. Put your savings to work in an offset account

An offset account is an everyday account linked to your loan. Every dollar sitting in it is subtracted from your loan balance before interest is calculated. Keep $20,000 in there and, over the life of our example loan, you’d save around $108,000 and finish over 2 years early. The money is still yours to use if the car blows a tyre. Many people have their pay land straight into their offset so it works for them every single day.

4. Don’t spend a rate cut

Rates won’t stay this high forever. When they do come down, your lender will usually lower your minimum repayment. Resist the urge to pocket the difference! If your rate dropped by just 0.25% and you kept paying the same amount, you’d finish about 2 years sooner and save roughly $62,000.

5. Ask for a better rate (or shop around)

Loyalty doesn’t always pay. Moneysmart notes the gap between variable rates on the market can be more than 2%. Start by calling your lender and asking for a sharper rate. If they won’t budge, compare other options with the mortgage switching calculator, and watch out for break fees, discharge fees and lender’s mortgage insurance. However, if you do refinance, don’t quietly reset back to a fresh 30-year term, or you’ll undo your hard work. And unless there’s a specific strategy behind it, stick with principal and interest rather than interest-only.

6. Give your windfalls a job

Tax refund, work bonus, a generous birthday cheque? Dropping even part of it on the loan as a lump sum can save years. Speaking of tax refunds, if you haven’t lodged yet, our tax return team can help you get it sorted before the 31 October deadline.

7. Find the leaks in your budget

That streaming service you forgot you had, or the gym membership you’ve never used. Small leaks add up, and redirecting them to your mortgage is painless once it’s set up. If you’d like a hand building a budget that actually sticks, that’s exactly what our cashflow and budgeting advice is for.

How the numbers stack up

Based on a $600,000 loan at 6.5% p.a. over 30 years, with monthly repayments of about $3,792.

Illustrative only. Assumes the rate stays the same for the life of the loan and offset balances stay constant. Your results will differ.

Before You Throw Every Spare Dollar at The Bank

Paying off your mortgage faster is a brilliant goal, but it’s not the only goal. So, here a few things worth checking first:

• Keep a safety net. Life loves a surprise. Have a cash buffer you can get to quickly (an offset account is handy here, as the money stays accessible).
• Knock out pricier debt first. If you’ve got a credit card charging 20% or more, that’s usually the bigger fire to put out. Our credit card repayment calculator shows how fast it adds up, and our debt management advice can help you tackle it in the right order.
• Check your loan’s fine print. Fixed-rate loans often cap extra repayments, and going over can trigger fees.
• Don’t forget the bigger picture. For some people, extra money could work harder in super or investments, depending on age, tax and goals. And if you’re the main earner, making sure your income is protected keeps the whole plan on track.

There’s no one-size-fits-all answer here, which is why it’s worth running the numbers on your own situation.

FAQs

What’s the fastest way to pay off a mortgage?

Paying more than the minimum, as early and as often as you can. Regular extra repayments, an offset account with a healthy balance and lump sums from windfalls usually make the biggest difference. Combine a few and the results compound nicely.

Is an offset account better than making extra repayments?

Both cut your interest by roughly the same amount. The difference is access: money in an offset stays in your own account, while extra repayments go into the loan and may only be available through redraw (which can have limits or fees). If there’s any chance you’ll rent the home out one day, the choice can matter for tax, so it’s worth getting advice first.

Do fortnightly repayments really help with paying off a mortgage faster?

Yes, as long as you’re paying half the monthly amount each fortnight. That adds up to one extra monthly repayment a year. Check how your lender calculates it, as some won’t give you that bonus payment.

Can I make extra repayments on a fixed-rate loan?

Often only a limited amount, and going over can mean fees. Many people split their loan into fixed and variable portions so they get some certainty plus the freedom to pay extra.

Should I pay off my mortgage or put more into super?

It depends on your age, income, tax position and how far you are from retirement. Sometimes it’s one, sometimes the other, and often a bit of both. This is a great question to run past an adviser.

What if I’m struggling to keep up with repayments?

Talk to your lender early, as they have hardship options. Moneysmart’s guide explains what help is available, and our team is happy to help you review your budget.

Ready to Start Paying Off Your Mortgage Faster?

Step 1: Play with the numbers. Pop your loan details into our free mortgage calculator and see how different repayments and frequencies change the picture.

Step 2: Talk to a human. A calculator can show you the maths, but it can’t tell you whether extra repayments, an offset, super or investing is the right move for your life. That’s where we come in. Our Brisbane and Toowoomba advisers will look at your whole picture (budget, debts, goals, the lot) and build a plan that gets you to mortgage-free sooner, without giving up the things you love.

Book a chat with the HPartners team or call us on 1300 656 260. The sooner you start, the more interest you keep in your pocket.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.