Extra Home Loan Repayments: Time and Interest Saved

Paying a bit more than the minimum is the plainest way to shorten a home loan. The effect is bigger than most people guess, because each extra dollar keeps saving interest for every remaining year of the loan. This guide shows what different amounts do, using example numbers, and the loan terms to check first. We read the official guidance on 29 October 2026.

HomeLoansCalculator.au is a general information site run by Dominet BV. This page is general information only and is not financial advice. It does not consider your objectives, financial situation or needs. We are not a lender or a mortgage broker and we don't recommend any loan. Check with a licensed professional or the lender before you act. Figures were checked on 29 October 2026. Read our general information notice. Our examples assume the rate never changes, which won't be true for a real loan.

Why extra repayments work so well

On a principal-and-interest loan, your minimum repayment is set so the loan finishes on time. Interest is charged on whatever you still owe. Pay more, and the balance drops faster, so next month's interest is lower, so more of the next payment goes to the balance. The effect compounds.

Moneysmart puts it simply. In the early years of a home loan, most of each repayment goes on interest, so extra payments made then reduce the interest you pay over the life of the loan the most.

Worked examples

All examples use the same base loan, with example figures only:

• Loan: $600,000
• Example rate: 6.5% a year (not a market rate)
• Term: 30 years, monthly repayments of $3,792.41
• Total interest with no extra payments: about $765,300

Example 1: a regular extra amount each month

Example 2: a one-off lump sum

Put $10,000 (a tax refund, say) onto the loan at the end of year 1 and keep the normal repayment. The loan finishes in about 28 years 8 months, roughly 16 months early, and you save about $52,800 in interest. That's more than five times the lump sum, because it sits against the balance for almost the whole loan.

Example 3: the same $10,000 later

The later you pay it, the less it saves, because there are fewer years of interest left to avoid. A lump sum in year 20 still helps, but much less than the same amount in year 1. Our extra repayments calculator lets you set when a lump sum goes in so you can see the difference.

Example 4: fortnightly instead of monthly

Moneysmart notes that paying half your monthly repayment every fortnight adds up to one extra monthly repayment each year, because there are 26 fortnights in a year. On our base loan, that brings the term down to about 24 years and 2 months. See the repayments guide for how that's worked out and the catch to check with your lender.

Rate cuts and refinancing as extra repayments

If your rate falls, or you refinance to a lower one, your lender may lower your minimum repayment. If you keep paying the old, higher amount, the difference works as an extra repayment. Moneysmart makes this point: switch to a lower rate but keep your repayments the same, and you'll pay the loan off sooner.

Check your loan allows it

Before you start, look at your loan terms or Key Facts Sheet for:

• Whether extra repayments are allowed. Moneysmart says many variable loans allow them. It also says fixed rate loans may limit extra repayments and have fewer features.
• Caps on fixed loans. Some fixed loans let you pay a set amount extra each year without a fee. Paying more may trigger break costs. Ask the lender for its limit in writing.
• Fees. Ask whether any fee applies to extra repayments. Moneysmart lists this among the questions to ask a lender before choosing a loan.

Getting the money back out: redraw

Extra repayments go straight onto the loan. If your loan has a redraw facility, you may be able to take them back out. Moneysmart says some lenders limit how much you can redraw, charge a fee or delay access, and how and when you can get the money depends on your loan terms.

If you want easy access to your savings, an offset account might suit better, though it may cost more. At the same rate and the same balance, an offset and extra repayments save roughly the same interest.

Other places your money could go

An extra repayment is a saving at your loan's interest rate. It isn't the only use for spare cash. Paying off a credit card or personal loan at a higher rate usually saves more. Keeping an emergency buffer matters too, especially if your loan has no redraw or offset. If you're weighing extra repayments against super contributions or investing, that's a personal advice question for a licensed adviser.

What this means for you

• Small regular amounts add up. $200 a month in our example cut about 4 years.
• Earlier beats later. Front-load extra payments if you can.
• If your rate falls, think about keeping your repayment where it was.
• Check your loan's rules on extra repayments and redraw before you rely on either.
• Keep some money you can reach quickly, either in an offset, a redraw you've checked, or savings.

Run your own numbers in the extra repayments calculator, or go back to the calculators hub.

Frequently asked questions

How much do extra repayments save on a home loan?

It depends on the loan size, rate, term left and when you pay. On a $600,000 loan at an example rate of 6.5% over 30 years, $200 extra a month saved about $122,000 and roughly 4 years. Use the calculator with your own loan details.

Is it better to make a lump sum or regular extra repayments?

Both reduce interest. A lump sum early in the loan has a large effect because it sits against the balance for longer. Regular amounts build up over time. Many people do both when they can.

Can I make extra repayments on a fixed rate loan?

Sometimes, within a limit. Moneysmart notes fixed loans may restrict extra repayments, and paying beyond the limit can trigger break costs. Ask your lender for its exact limit.

Will extra repayments lower my monthly repayment?

Usually not. Most lenders keep the repayment the same so the loan finishes earlier. Some will recalculate a lower repayment if you ask. Check what your lender does.

Can I get extra repayments back if I need them?

Only if the loan has a redraw facility, and then within its rules. Some lenders limit or delay redraws or charge a fee. An offset account gives easier access to your money.