Extending your loan term lowers your repayments, but it adds a lot of interest. Stretching a $500,000 loan with 20 years left back out to 30 years cuts repayments by about $563 a month at 6.63%, and adds about $249,000 in interest over the life of the loan. It can be a sensible short-term fix if rate rises have stretched your budget, as long as you plan to pay extra again once you can.
What extending your loan term means
Your loan term is how long you have to repay the loan. As you pay it down, the remaining term shortens. Extending means resetting it to a longer period, often back to 30 years, usually by refinancing or asking your lender for a variation. The same balance spread over more years means smaller repayments, but you pay interest for longer.
The numbers
| $500,000 balance at 6.63% | Monthly repayment | Total interest from here | Extra interest vs keeping 20 years |
|---|---|---|---|
| Keep 20 years remaining | $3,766 | About $404,000 | Nil |
| Extend to 25 years | $3,417 | About $525,000 | About $121,000 |
| Extend to 30 years | $3,203 | About $653,000 | About $249,000 |
Our calculations at the 6.63% average variable rate (Canstar, 2 October 2026), excluding fees. Check your own repayments.
Benefits
- Immediate relief. Lower required repayments free up cash flow, which can help after the 2026 rate rises added about $388 a month to a $600,000 loan.
- Flexibility. On a variable loan, you can still pay more than the minimum. Extending lowers the required repayment without stopping you paying extra when you can.
- Avoiding hardship. A longer term can be better than falling behind on repayments, missing payments or selling under pressure.
Risks
- Much more interest. Over the life of the loan, the extra interest can run into hundreds of thousands of dollars.
- Debt into retirement. A new 30-year term may run past the age you plan to stop working. Lenders may ask how you’ll repay it.
- Slower equity growth. You build equity more slowly, which matters if prices fall.
- Serviceability. If you refinance to extend, the new lender will test you at your rate plus 3 percentage points.
Ways to extend
- Ask your lender for a variation. Some lenders will extend the term on an existing loan, particularly as part of a hardship arrangement. There may be a fee.
- Refinance to a new loan. A new 30-year loan resets the term. It’s also a chance to get a lower rate, which can cut repayments without extending as far.
- Request hardship help. If you’re struggling, lenders must consider hardship requests, which can include extending the term, a temporary repayment reduction or a payment pause.
Alternatives to consider first
- A lower rate. Cutting your rate by 0.5% reduces repayments on a $500,000 loan with 20 years left by about $146 a month, and you pay less interest, not more.
- Switching to interest-only for a short period, if your lender allows it. Repayments drop, but rise sharply when the period ends.
- Using an offset. Savings in an offset reduce interest while staying available.
- Using redraw. If you’ve paid ahead, some lenders let you reduce repayments until the extra is used up.
Get back on track later
If you do extend, treat it as temporary. Once your budget recovers, keep paying the old, higher repayment, or add extra repayments, so you pay off the loan on your original timetable. On a variable loan this costs nothing to do. See how the loan term affects your rate and costs.
Frequently asked questions
How much extra interest does extending my loan cost?
It depends on your balance, rate and how far you extend. Taking a $500,000 loan with 20 years left out to 30 years at 6.63% adds about $249,000 in interest; extending to 25 years adds about $121,000. Paying extra when you can reduces this.
Can I extend my loan term without refinancing?
Sometimes. Some lenders will vary the term on your existing loan, especially as part of a hardship arrangement, but it isn’t guaranteed and they may charge a fee. Otherwise, refinancing to a new loan with a longer term is the usual way to do it.
Can I shorten the term again later?
Yes. On most variable loans you can make extra repayments at any time, which shortens the effective term without any formal change. You can also ask your lender to reduce the term formally, which raises your required repayment, or choose a shorter term next time you refinance.
Sources
- Canstar, Average home loan interest rates, as at 2 October 2026
- ASIC Moneysmart, Pay off your mortgage faster
- ASIC Moneysmart, Switching home loans
General information only. It does not consider your objectives, financial situation or needs and is not credit, tax or financial advice.