Extra repayments calculator

There are a number of different ways you could pay off your mortgage faster, including:

Increasing the frequency of repayments

By increasing the frequency of repayments, you could steadily chip away at your principal and lower the amount that your future interest rate is calculated on. For example, switching from monthly to fortnightly repayments is a seemingly small change that could make a big difference over the life of your loan.

By making 26 fortnightly repayments, you are effectively making 13 monthly repayments rather than 12. These additional repayments may reduce your principal and enable you to pay off your home loan sooner than you would have been able to otherwise.

Open an offset account

Opening an offset account connected to your home loan could lower the amount of interest owing on your loan and make it easier for you to pay off your mortgage faster. Money in that account ‘offsets’ daily against the balance of your loan , meaning that interest you need to pay is reduced because interest is then only charged on your net balance.

Aside from helping to lower interest, another key benefit of opening an offset account is that it allows you the flexibility to access the money within it for any unexpected expenses. If you have multiple offset accounts linked to your loan, you may find it helpful to separate your money into different accounts, for example an “emergency funds” account and a “new car” account.

Make extra repayments

Lump sum repayments could significantly reduce the overall interest charged on your loan. It’s always recommended to get into the habit of depositing gifts, bonuses and tax returns into your mortgage account (or offset account, if you have this facility). This may help shorten the length of your mortgage as paying extra means your loan will be repaid ahead of time while also decreasing the amount of interest that you pay over the term of the loan.

Extra repayments are an additional feature that is offered on certain home loans. They allow borrowers to voluntarily pay extra towards their mortgage in addition to the minimum repayments. By making extra repayments on a mortgage, a borrower could cut years off their home loan.

On a typical home loan over 30 years, most of the repayments in the first five to seven years go towards paying off interest. As this can leave principal amounts relatively stagnant, extra repayments can be used by borrowers to pay off their loan faster by reducing the principal on their mortgage. This in turn lowers the amount that the interest rates are calculated on, thus reducing the ongoing cost of interest.

Unlimited extra repayments may offer greater flexibility for borrowers, including the ability to withdraw repayments from their offset account. This can be particularly important when it comes to protecting yourself against unexpected emergencies or alternatively, help with paying for new opportunities.

Home loans typically involve making regular principal and interest repayments. This means that in each repayment, you’re only paying back a portion of the money owing on your home, as well as the home loan interest rate charged on that principal.

Making additional repayments will generally reduce the amount of your home loan principal. As the interest on your home loan repayment is calculated based on the amount of the remaining principal, reducing your principal will generally result in you being charged less interest over the term of the loan.

Find out more about your borrowing power using our home loan calculators.