Should I make extra repayments on my home loan?

Depending on your lender and the conditions of your mortgage, there could be both positives and negatives to going beyond your required monthly repayments.
Ava Crawford
Written by
Ava Crawford
Imogen Baxter
Reviewed by
Imogen Baxter
Last updated
August 8, 2023
0 minute read
Table of contents
white kitchen counter in an Australian home on which the owner has made extra repayments

If you’ve found yourself with some extra money and you’re considering making some extra payments on your home loan, you might be wondering if those extra home loan repayments are worth it. Depending on your lender and the conditions of your mortgage, there could be both positives and negatives to going beyond your required monthly repayments — let’s take a look.

Making additional repayments to your mortgage

Depending on your home loan, your lender may offer features like unlimited extra repayments. Making additional payments, if available on your home loan, could be one way to reduce your loan term (paying off your loan faster) and pay less interest over the life of your loan.

In Australia, your home loan will be your principal amount paid back along with interest (at the interest rate attached to that specific financial product) in regular instalments. This usually means monthly repayments, but some lenders will be flexible and allow weekly or fortnightly repayments. You will be able to choose between a fixed rate and a variable interest rate, along with choosing the loan term and loan amount. Keep an eye on the comparison rate, which takes the interest rate you will pay and factors in ongoing fees on the home loan.

Generally speaking, more straightforward loans with fewer features and stricter criteria will also have lower rates. Check the target market determinations and product disclosure statements for any home loan before seeking to make any extra monthly repayments.

While making regular repayments to your loan account will pay off your home loan in the set loan term, making additional repayments will speed up that process. For that reason, your lender may limit how many extra repayments you can make — if you can make them at all. As a disclaimer, there may also be fees attached for making any additional lump sum payments to your home loan.

With an OwnHome Deposit Boost Loan, you can make unlimited free repayments.
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Likewise, a bare-bones home loan may not allow you access to a redraw facility. This is where you can tap into any extra home loan repayments that you have made and take that money back out, should your financial situation call for it. This is something to check for if you’re considering making any extra repayments.

If you’re considering making extra repayments on your own home, you’ll likely want to know what difference your repayments will actually make.

How much can making extra mortgage repayments save me?

To find out how much you can save by making additional payments to your mortgage, you may want to use an extra repayments calculator.

With any extra repayments calculator, you’ll need to plug in these details:

  • Loan balance — the amount owing in your loan account.
  • Interest rate — this could be a single interest rate if you’re on a variable rate home loan or may require more specific information if you are on a fixed rate home loan (like the duration of the fixed rate). This will be used to calculate the total interest on your loan if you are making the regular repayments and the difference between that and the amount of interest you will pay with additional repayments.
  • Loan term — the amount of time remaining on your loan (per your loan agreement).
  • Loan fees — any regular ongoing fees, potentially or fees attached to making extra repayments.
  • Repayment amounts — Generally, you can toggle optional repayment amounts to see what difference different repayments will make.

Calculators will be helpful for a broad strokes view of how much you could save by making extra home loan repayments.

They can’t specifically take into account factors like you potentially opting to refinance your home loan down the line, putting money into an included offset account, or taking advantage of your home equity (whether it’s to buy an investment property, fund a retirement, or gain access to more funds). These changes to your financial situation, like refinancing, can switch up predictions entirely.

You should also remember that while extra repayments may be worth it despite fees, a certain level of fees may eventually outweigh potential savings.


How many extra home loan repayments can I make?

The amount of extra repayments you can make will depend on any caps your lender has in place and on any restrictions on your home loan. Be sure to check the product disclosure statement for any restrictions and fees surrounding additional repayments.

Should I make extra home loan repayments or put my money in an offset account?

If your home loan offers both unlimited extra repayments and the ability to put money in an offset account, you may want to opt to do that instead. Putting money in an offset account will not pay off your loan balance faster, but it could be a good option as it does not count as taxable income. Your choice will come down to what suits your financial situation and whether you are focused on paying down your home loan faster (keeping discharge fees in mind!) or aren’t too worried about that.

Should I make extra repayments or use that money for other things?

If you’re considering making extra repayments on your home loan, you may also consider using those funds for other purposes, like paying off credit card debt or putting money into a bank account. If you do have other debt to your name, this may be worth clearing — a home loan is a long-standing debt that is accrued at a consistent rate and is attached to an asset, but credit card debt and personal loans can be extremely big detractors to your credit score. When it comes to saving money vs. paying off your loan account, this comes down to your financial situation and whether it is more important for you to own your home and reduce your monthly repayments or to build up some savings in a bank account.

Is it better to make a lump sum payment or add extra monthly repayments?

For the maximum impact, you could pay both a lump sum payment to your mortgage and add additional repayments over the life of your loan — but individually, both options will reduce the amount of interest you pay on your home loan.

This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.

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