You can pay off your mortgage years faster even with rates higher in 2026. The most effective steps are getting a lower rate, paying a little extra every month, keeping savings in an offset account and putting windfalls straight onto the loan. On a $600,000 loan at 6.63%, an extra $500 a month cuts about eight years off a 30-year loan and saves around $248,000 in interest.
What each strategy is worth
| Strategy on a $600,000 loan at 6.63% | Time saved | Interest saved |
|---|---|---|
| Extra $200 a month | About 4 years | About $126,000 |
| Extra $500 a month | About 8 years | About $248,000 |
| Extra $1,000 a month | About 12.5 years | About $370,000 |
| Half-monthly fortnightly repayments | About 6 years | About $184,000 |
| $20,000 lump sum at the start | About 3 years | About $112,000 |
| $50,000 kept in an offset | About 5 years | About $243,000 |
Our calculations for a 30-year principal and interest loan at 6.63%, the average variable rate according to Canstar as at 2 October 2026, assuming the extra payments continue and rates don’t change. Run your own numbers with our mortgage calculator.
1. Get the lowest rate you can
The gap between the average variable rate (6.63%) and the lowest advertised (around 5.79%) is worth about $327 a month on a $600,000 loan. Ask your lender to match a better rate, or consider refinancing. If you keep paying your old repayment after the rate drops, the whole saving goes towards paying off the loan.
2. Make extra repayments
Small, regular extra repayments make a big difference because they reduce the balance that interest is charged on, every day, for the rest of the loan. Set up an automatic extra amount on payday so you don’t have to think about it.
3. Pay fortnightly
Paying half your monthly repayment every fortnightly adds up to 13 monthly repayments a year instead of 12. On our example loan, that cuts about six years off the term.
4. Use an offset account
Money in an offset account reduces the interest charged just like an extra repayment, but stays available. Pay your salary into it and keep your emergency fund there. It’s a good alternative to extra repayments if you might need the money back, or if you might rent out the property one day.
5. Put windfalls on the loan
Tax refunds, bonuses and gifts can go straight into the loan or the offset. A $20,000 lump sum early in the loan saves about $112,000 over its life.
6. Keep repayments the same when your rate falls
When rates eventually fall, or you refinance to a lower rate, keep paying the higher amount. Your budget is already used to it, and the difference goes straight off the balance.
7. Watch the limits on fixed loans
Fixed loans often cap extra repayments, commonly at $10,000 to $30,000 a year, and may charge break costs if you go over. If paying down the loan quickly is a priority, consider splitting the loan so the variable part takes your extra repayments and the fixed part gives you certainty.
8. Cut costs that don’t add value
Check for package fees you don’t need, insurance you’re paying through the loan, or features you don’t use. Every dollar saved can go to the loan.
A note for investors
If you have both a home loan and an investment loan, focus extra repayments on the home loan, because its interest isn’t tax deductible. On the investment loan, an offset is usually better than extra repayments, because redrawing from an investment loan for private purposes can reduce your tax deductions.
Frequently asked questions
How much do extra repayments save?
More than most people expect. On a $600,000 loan at 6.63%, an extra $200 a month saves about $126,000 in interest and four years; an extra $500 a month saves about $248,000 and eight years. The earlier in the loan you start, the bigger the saving.
Is it better to use an offset or make extra repayments?
They save the same interest. An offset is more flexible because the money stays in your account, and it’s better if you might later rent out the property. Extra repayments suit people who’d be tempted to spend money sitting in an account. Redraw can give you access to extra repayments, but often with limits.
Are there limits on extra repayments on fixed loans?
Usually. Many fixed loans let you pay a set amount extra each year, often $10,000 to $30,000, and may charge break costs if you go over. Variable loans normally allow unlimited extra repayments. A split loan lets you fix part of the loan and pay extra on the variable part.
Sources
- Canstar, Average home loan interest rates, as at 2 October 2026
- ASIC Moneysmart, Pay off your mortgage faster
- ASIC Moneysmart, Mortgage offset accounts
General information only. It does not consider your objectives, financial situation or needs and is not credit, tax or financial advice.