Find out how much interest you save and how many years you cut off your mortgage by making regular or one-off extra repayments. Results show the impact of extra payments compared to making minimum repayments only.
Extra Repayments Calculator
How Extra Repayments Work
Every home loan comes with a minimum required monthly repayment. That minimum payment is calculated to pay off your loan exactly over the loan term at the current interest rate. When you make extra repayments above this minimum:
- The extra amount goes directly to reducing your loan principal
- A smaller principal means less interest accrued in the next cycle
- Less interest means more of your next minimum repayment goes to principal
- This snowball effect accelerates over time
The result: even modest extra repayments can save tens of thousands in interest and shave years off your loan.
The Power of Small Extra Repayments
The following table shows the impact of different extra repayment amounts on a $550,000 loan at 6.00% p.a. over 30 years.
| Extra per month | Interest saved | Years saved | New loan term |
|---|---|---|---|
| $0 (minimum only) | — | — | 30 years |
| $200/month | ~$58,000 | ~2.8 years | ~27.2 years |
| $500/month | ~$122,000 | ~6 years | ~24 years |
| $1,000/month | ~$193,000 | ~9.5 years | ~20.5 years |
| $2,000/month | ~$273,000 | ~14 years | ~16 years |
Estimates only, constant rate assumed.
The interest saved column is striking. $500/month extra saves approximately $122,000 in interest on a $550,000 loan — that’s a return that’s hard to beat, given the interest saving is certain and risk-free, unlike investment returns.
Lump Sum Repayments — Tax Refunds, Bonuses and Windfalls
One-off lump sum payments have a powerful effect on your loan because they immediately reduce the principal balance on which interest is calculated.
Example: A $20,000 tax refund applied to a $550,000 loan at 6.00% at the 5-year mark saves approximately $38,000 in total interest and cuts over 2 years off the loan term.
Common sources of lump sum repayments:
- Tax refunds
- Annual bonuses or commissions
- Inheritance
- Savings windfall (selling a car, asset)
- FHOG grant proceeds (after meeting first home requirements)
Extra Repayments vs Offset Account
Both strategies reduce the interest you pay — but they work differently:
| Feature | Extra repayments | Offset account |
|---|---|---|
| Reduces loan balance | Yes (permanently) | Effectively (while balance remains in offset) |
| Can redraw funds | Only if redraw facility available | Yes, immediately accessible |
| Tax treatment (investor) | Permanent repayment reduces deductible interest | Offset keeps loan balance intact (may preserve deductibility) |
| Flexibility | Lower | Higher |
| Best for | Owner-occupiers with no need for liquidity | Anyone needing access to funds |
For owner-occupiers, extra repayments or an offset account achieve similar interest savings. The main difference is access to funds. For investors, the tax treatment can differ significantly — speak with your accountant about which is more appropriate. See our offset account vs extra repayments guide for a full comparison.
Can I Make Extra Repayments on My Loan?
Variable Rate Loans
Yes — almost all variable rate loans allow unlimited extra repayments at no cost. This is one of the main advantages of a variable rate loan.
Fixed Rate Loans
Most fixed rate loans restrict extra repayments. The most common limit is $10,000 per year in additional repayments above the minimum. Exceeding this limit may trigger break costs (also called an economic cost charge). If you plan to make significant extra repayments, a variable rate or split loan may be more suitable.
Split Loans
A split loan — part fixed, part variable — allows unlimited extra repayments on the variable portion while giving you rate certainty on the fixed portion. See our split loan guide for more.
Strategies to Make Extra Repayments Work
Round up your repayment — if your minimum monthly repayment is $3,597, round it up to $3,800 or $4,000. Small rounding has a meaningful long-term effect.
Pay fortnightly instead of monthly — this alone adds the equivalent of one extra monthly payment per year. See our fortnightly vs monthly repayments guide for the detail.
Redirect rate cut savings — if the RBA cuts rates and your repayment drops, don’t reduce your payment — keep paying the same amount. The rate reduction means more of each payment goes to principal.
Automate a small top-up — set up a standing order for an extra $200–$500/month from your salary account. Automatic extra repayments are easy to maintain and add up significantly over 20+ years.
FAQ — Extra Repayments Australia
Does making extra repayments reduce my required minimum payment?
On most Australian variable rate loans, extra repayments do not automatically reduce your required minimum payment — they reduce your loan balance. Your repayment obligation stays the same unless you formally request a repayment holiday or restructure. The benefit is that your loan pays off sooner.
Can I redraw extra repayments later?
If your loan has a redraw facility, you can generally withdraw extra repayments you’ve made (subject to lender minimums and possible fees). However, redrawing funds reverses the interest savings you’d accumulated. Offset accounts are more flexible for this purpose.
Do extra repayments help with an offset account too?
You can have both an offset account and still make extra repayments. The offset account reduces interest on your existing balance; extra repayments permanently reduce the principal. For maximum efficiency, combining both strategies works well for owner-occupiers.
Is it better to invest extra money or pay down the mortgage?
This is one of the most common financial decisions Australians face. The mortgage payoff gives a guaranteed, risk-free return equal to your interest rate (currently 6%+). Investments may return more over time but carry risk. The answer depends on your interest rate, investment horizon, tax position, and risk tolerance. See our pay off mortgage or invest guide for a full analysis.
Results are estimates based on a constant interest rate. Actual savings will vary with rate changes, lender policy, and loan activity. Always confirm your loan’s extra repayment terms with your lender before making payments above the standard minimum. For advice tailored to your situation, speak with a licensed financial adviser. Find one through MoneySmart.