The biggest lever is almost always your interest rate, because it costs nothing to pull and applies to the whole balance. After that: keeping repayments unchanged when rates fall, using an offset account properly, making extra repayments, and directing lump sums at the loan. Switching to fortnightly payments helps, but far less than the marketing suggests.
There is a lot of folk wisdom about paying off a mortgage early, and some of it is close to useless. What follows is ordered by how much difference each lever actually makes, which is not the order they usually get recommended in.
1. Fix your rate first, before anything else
Everything else on this list requires you to find money. This one does not.
Your rate applies to the entire balance for the entire term, so a reduction has a larger and more certain effect than most extra repayment plans, and it costs you a phone call. Many borrowers are paying meaningfully more than their own lender charges new customers for the same product — particularly anyone who rolled off a fixed rate and stayed.
Ask your lender to reprice. If they will not, find out what refinancing would save and use the break-even calculator to check it is worth it. Do this before you start economising on lunches.
2. When rates fall, do not lower your repayment
This is the most effective habit in the whole list and it requires no additional money at all.
When your lender reduces your rate, they typically also reduce your minimum repayment. If you leave the repayment where it was, the entire difference goes to principal. You feel nothing, because you were already paying that amount, and the loan shortens.
Repeat this across every rate reduction over a mortgage and the cumulative effect is substantial. Most lenders let you set the repayment above the minimum; it is a single request.
3. Use an offset account properly
An offset reduces the interest charged by the balance sitting in it, while keeping the money available. Two habits make it work:
- Have your salary paid into it. Even money that leaves again at the end of the month reduces interest while it is there, and interest is calculated daily.
- Keep your emergency buffer in it rather than in a savings account. The interest you avoid is not taxed; interest you earn is. After tax, the offset almost always wins.
Check the account is worth its fee at the balance you actually maintain — see offset vs redraw and the offset calculator.
4. Extra repayments, and why early ones matter most
Every extra dollar reduces the balance that all future interest is calculated on, so the earlier it goes in, the longer it works. An extra repayment in year two does considerably more than the same amount in year twenty.
A modest, sustainable amount every month beats an ambitious amount you abandon after four months. The extra repayments calculator shows the effect on both the term and the total interest, and the numbers are usually more encouraging than people expect.
One caution: on a fixed loan, extra repayments are normally capped, with penalties beyond the cap.
5. Lump sums: tax refunds, bonuses, inheritances
Irregular money is where real progress happens, because it arrives in amounts large enough to matter. A tax refund or bonus put straight against the loan — or into the offset — before it reaches your everyday account tends to work, because you never adjust to having it.
The lump sum payment calculator shows what a single payment takes off the term. For a large inheritance, get advice before committing it all: paying down a mortgage is a guaranteed return equal to your rate, which is excellent, but it is also irreversible in a way that keeping the funds in an offset is not.
The fortnightly repayment trick, honestly assessed
The standard advice is to switch to fortnightly repayments. It does work, but not for the reason usually given.
The benefit comes from a specific arrangement: paying half the monthly amount every fortnight. Because there are 26 fortnights in a year and only 12 months, you end up making the equivalent of 13 monthly payments instead of 12. The gain is that thirteenth payment, not the payment frequency.
If your lender simply divides your annual repayment into 26 equal parts, you pay exactly the same each year and the benefit is close to nothing beyond a marginal daily interest effect. Check which arrangement you are being offered — the difference is the whole point. See fortnightly vs monthly repayments and the fortnightly calculator.
What does not work
- Refinancing to a lower repayment via a longer term. This is the opposite of paying off faster, however it looks each month.
- Chasing a marginally better rate every year. Fees and enquiries accumulate; the gain is small after the first move.
- Aggressive repayments with no emergency buffer. Putting every spare dollar into a loan you cannot easily draw back leaves you exposed. An offset gives you the same interest saving with the money still reachable.
- Paying down deductible investment debt before non-deductible home debt. Usually backwards. Clear the debt that gives you no tax benefit first.
The how long to pay off your home loan calculator lets you test any combination of these against your own balance.
Common questions
Usually a combination: get the rate right, keep repayments steady when rates fall, run your money through an offset, and direct lump sums at the balance. The rate is the lever most people skip and it is generally the largest.
The interest saving is identical. The offset keeps the money accessible and protects your tax position if you ever rent the property out, which usually makes it the better choice. Extra repayments suit borrowers who would otherwise spend the balance.
Only if you are paying half the monthly amount every fortnight, which produces the equivalent of thirteen monthly payments a year. If your lender divides the annual total into 26, the benefit is minimal. Ask which one you have.
Paying down the mortgage is a guaranteed, untaxed return equal to your interest rate. Investing may return more, with risk. Which is right depends on your rate, your tax position and how you feel about risk, and it is worth discussing with a financial adviser rather than a broker.
On a variable loan, almost always, and you can usually set an amount above the minimum permanently. On a fixed loan there is normally an annual cap with penalties beyond it.