Pay Off Your Home Loan 5 Years Sooner: 7 Strategies That Could Save You Thousands

Paying off your home loan five years sooner could save you thousands of dollars in interest and help you become mortgage-free earlier.

But you don't necessarily need a huge salary increase or a large lump sum to make progress. Small, consistent changes to how you repay your mortgage, combined with the right loan features, can make a meaningful difference over time.

If you have a $600,000 home loan, there are several strategies worth exploring, from paying fortnightly instead of monthly to making extra repayments, using an offset account and checking whether you're paying a competitive interest rate.

In this guide, we'll explain how these strategies work, illustrate the potential impact with a $600,000 loan, and outline practical steps you can take to pay off your home loan sooner.

Important: The examples in this article are estimates for educational purposes only. Your actual savings and loan term will depend on your interest rate, repayment schedule, fees, loan features and personal circumstances.

How much interest could you pay on a $600,000 home loan?

Let's start with an example.

Imagine you have a $600,000 principal-and-interest home loan with a 30-year loan term and an interest rate of 6% per annum.

If the interest rate remained unchanged for the entire term, your estimated repayments and total interest would be:

These figures are rounded estimates. Actual repayments will vary depending on how your lender calculates interest and processes repayments.

The important point is that interest can represent a substantial part of the total cost of a home loan.

What if you could repay the loan in 25 years instead of 30?

You would need to make higher repayments or otherwise reduce the amount of interest charged over time. However, the potential benefit is significant: you could become mortgage-free five years earlier and reduce the total interest paid.

The following strategies can help you explore how to make that possible.

1. Pay fortnightly instead of monthly

One of the simplest ways to potentially pay off your home loan sooner is to switch from monthly repayments to fortnightly repayments.

The trick is to pay half your monthly repayment every fortnight. Because there are 26 fortnights in a year, you effectively make the equivalent of 13 monthly repayments instead of 12.

That extra repayment can help reduce your loan balance faster, meaning less interest may accumulate over the life of your loan.

How much could you save on a $600,000 home loan?

Let's look at an example.

Imagine you have a $600,000 principal-and-interest home loan with a 30-year term and an interest rate of 6.25% per annum.

By switching to half-monthly repayments every fortnight, you could potentially:

• Save around $162,000 in interest.
• Pay off your home loan about 5 years and 8 months sooner.

That's a significant difference without needing to increase the amount of each individual repayment beyond half your usual monthly payment.

Why does paying fortnightly make such a difference?

With monthly repayments of $3,694.30, you pay approximately $44,332 over 12 months.

With fortnightly repayments of $1,847.15, you make 26 payments each year, totalling approximately $48,026.

That means you pay around $3,694 extra towards your loan each year, the equivalent of one additional monthly repayment.

As your outstanding loan balance falls faster, less interest may accumulate over time. The effect can build year after year, potentially helping you become mortgage-free sooner.

Before you make the switch

These figures are illustrative estimates based on a constant 6.25% annual interest rate and specific repayment assumptions. Actual results will vary depending on your lender's interest calculations, payment timing, fees and loan terms.

Importantly, check how your lender calculates fortnightly repayments. Some lenders divide your annual monthly repayments by 26, which does not create the same extra repayment. To achieve the effect shown above, you would generally need to pay half your monthly repayment every two weeks.

The takeaway: If your budget allows, fortnightly repayments could be a simple way to make extra progress on your mortgage without having to find a large lump sum.

2. Make extra repayments whenever you can

Even relatively small extra repayments can make a difference because they reduce the balance on which interest is charged.

For a principal-and-interest loan, your regular repayment covers both interest and the loan principal. When you pay extra towards the principal, less of your balance remains outstanding, which can reduce future interest charges.

You don't necessarily need to make large additional payments every month. You could start with an amount that fits comfortably within your budget.

For example, you might consider:

• Adding $50 or $100 to each regular repayment.
• Putting part of a pay rise towards your mortgage.
• Using a portion of your annual bonus to reduce your loan balance.
• Applying a tax refund or other unexpected income to your loan.
• Increasing your repayments after paying off another debt.

What could an extra $200 a month mean?

Using the same $600,000 loan example at 6% p.a. over 30 years, adding $200 to the approximate monthly repayment would increase your payment from around $3,600 to around $3,800.

That extra $200 a month could reduce the loan term and total interest paid, assuming the additional amount is applied to the loan, and the interest rate remains unchanged.

The exact time and interest saved depend on the lender's calculations and the timing of repayments.

Before making extra repayments, check your loan conditions. Some fixed-rate loans restrict additional repayments or charge fees in certain circumstances. Variable-rate loans may offer more flexibility, but the terms still need to be checked.

3. Use an offset account to reduce the interest charged

If your home loan offers a mortgage offset account, it may help you reduce interest without necessarily locking your spare cash into the loan.

An offset account is a transaction account linked to an eligible home loan. The money in the account is offset against your outstanding loan balance when your lender calculates interest.

For example, if you owe $600,000 and maintain $20,000 in a fully linked offset account, your lender may calculate interest as though the balance were $580,000.

You still owe $600,000, but the interest calculation reflects the offset balance.

How could an offset account help?

You could keep money in the account that you would otherwise hold in a separate transaction or savings account, such as:

• Your emergency fund.
• Money set aside for bills.
• Savings for upcoming expenses.
• Part of your regular income before you spend it.

The longer eligible money stays in the offset account, the greater the potential interest benefit, all else being equal.

An offset account can also provide access to your money when you need it, unlike making an extra repayment that may require a redraw facility to access again.

Check the costs before choosing an offset loan

An offset account is not automatically the cheapest option. Some home loans with offset facilities have higher interest rates or account fees.

Compare the potential interest benefit with the additional costs. Also confirm that the account is a genuine offset account, that the balance is linked correctly to your loan and that you understand any access conditions.

4. Review your interest rate regularly

Your interest rate has a direct impact on how much interest you pay over the life of your mortgage.

If you haven't reviewed your home loan recently, it may be worth checking whether your current rate remains competitive for your circumstances.

You could start by comparing your existing rate with other available home loan options, including options from your current lender.

Depending on your circumstances, you may be able to negotiate a lower rate with your existing lender or consider refinancing to another lender.

Why does a lower interest rate matter?

When less interest is charged, more of each repayment may go towards reducing your principal, depending on how your repayments are structured.

For example, if your repayment stays the same after your interest rate falls, you may pay down the principal faster than you would have at the higher rate.

However, some lenders recalculate your minimum required repayment after an interest rate reduction. If you simply reduce your payment to the new minimum, you may not achieve the same time savings.

If your budget allows, consider maintaining your previous repayment amount after a rate reduction. The difference can help reduce your loan balance faster.

Should you refinance to get a lower rate?

Refinancing may be worth considering, but the lowest advertised rate is not necessarily the best loan for you.

Compare the full picture, including:

• The interest rate and whether it is fixed or variable.
• Annual and ongoing fees.
• Discharge, application and settlement costs.
• Offset and redraw features.
• Repayment flexibility.
• Any cashback offer conditions.
• The remaining loan term.

A refinance can also involve eligibility requirements, a new assessment of your financial circumstances and other costs. Make sure the overall benefit makes sense before switching.

5. Avoid automatically extending your loan term when refinancing

Refinancing can be useful, but extending your loan term can work against your goal of paying off your mortgage sooner.

Imagine you have already been paying off your home loan for five years. You refinance and start a new 30-year loan term.

Even if the new interest rate is lower, restarting the term could mean you continue making repayments for longer than you otherwise would.

Instead, consider whether you can refinance while keeping your remaining loan term similar to what it is today.

Alternatively, you may be able to choose a shorter term if the repayments comfortably fit your budget.

A shorter term generally means higher required repayments, so consider your household expenses, emergency savings and other financial commitments before deciding.

The goal isn't simply to get a new loan. It's to find a loan structure that suits your needs and helps you make progress towards becoming mortgage-free.

6. Put lump sums towards your home loan

If you receive a lump sum, you may be able to use some of it to reduce your home loan balance.

Potential sources include:

• An annual work bonus.
• A tax refund.
• Proceeds from selling an asset.
• Savings accumulated over time.
• Other one-off income.

Reducing the principal earlier can lower the balance on which future interest is charged.

However, paying a lump sum into your mortgage is not always the right choice for everyone. Consider keeping enough money available for emergencies and upcoming expenses before committing spare cash to your loan.

You should also check whether your lender allows lump-sum repayments without restrictions or fees, especially if you have a fixed-rate loan.

If you prefer to keep your savings accessible, an offset account may be an alternative, provided your loan offers one and the costs are worthwhile.

7. Review your budget and increase repayments when you can

Paying off a mortgage sooner often comes down to creating a consistent gap between your income and expenses — and directing some of that surplus towards your loan.

You don't have to make every possible cut to your household spending. Instead, look for changes that are sustainable over the long term.

For example, you could:

• Review subscriptions and recurring bills.
• Compare insurance, utilities and other household costs.
• Set a realistic weekly spending limit.
• Redirect money from a paid-off personal loan or car loan.
• Increase your mortgage repayments after a pay rise.
• Set up automatic additional repayments that fit your budget.

The key is consistency. A repayment amount that you can comfortably maintain is generally more useful than an aggressive target that leaves you financially stretched.

Keep an emergency fund and consider other priorities, such as high-interest debts, insurance and retirement savings. Paying off your mortgage sooner should not come at the expense of your broader financial wellbeing.

Can you really pay off a $600,000 home loan five years sooner?

It may be possible, but the answer depends on how much you can repay and the interest rate that applies to your loan.

Let's return to the illustrative example:

• Loan amount: $600,000.
• Starting term: 30 years.
• Interest rate: 6% p.a.
• Standard monthly repayment: approximately $3,600.

To repay the loan in 25 years rather than 30 years at the same interest rate, the required monthly repayment would be approximately $3,865, rather than $3,600.

That's roughly $265 extra each month, or around $3,180 more per year.

This illustrates the repayment level needed to target a 25-year payoff under these assumptions. It is not a guarantee of savings for any particular borrower, and the calculation excludes fees and assumes the interest rate remains constant.

You could approach the target by increasing your repayments, paying fortnightly in a way that creates an extra annual repayment, using an offset account or applying lump sums. The strategies can also be combined.

However, don't add together the estimated benefits of each strategy as though they are independent. For example, fortnightly repayments and extra monthly repayments both increase the amount you pay towards your loan. The combined effect depends on your actual repayment schedule and loan balance.

A practical plan to get started

You don't need to implement all seven strategies at once. Start by understanding your current loan, then choose changes you can sustain.

Step 1: Check your current loan. Confirm your outstanding balance, interest rate, remaining term, repayment amount and any restrictions on extra repayments.

Step 2: Calculate your baseline. Use a mortgage repayment calculator to estimate how long your loan may take to repay and how much interest you could pay under your current assumptions.

Step 3: Test a realistic extra payment. See what happens if you add $50, $100 or $200 to your monthly repayment, or switch to half-monthly repayments every fortnight.

Step 4: Review your offset and rate options. Check whether an offset account could help and whether your current interest rate and loan features remain suitable.

Step 5: Automate your plan. If your budget permits, set up the repayment arrangement and review it periodically. Reassess if your income, expenses or interest rate changes.

Step 6: Check your progress each year. Compare your loan balance with your expected progress and adjust your plan if needed.

Frequently asked questions

Take control of your home loan

You may not be able to change your original loan amount, but you can review how you manage your repayments.

Paying fortnightly, making extra repayments, using an offset account and reviewing your interest rate are all strategies worth exploring. Even small changes may make a difference over time, particularly when you start early and maintain them consistently.

The first step is to understand your current loan and calculate what different repayment strategies could mean for you.

Want to see how your repayments could change? Use Wurley's mortgage calculators to explore your options, or speak with Wurley Finance about reviewing your home loan.

Disclaimer: General information only, not personal financial advice. Examples are illustrative estimates and are not a guarantee of savings or a particular payoff date. Loan eligibility, rates, fees and features vary. Check your loan contract and consult an appropriately qualified professional before making financial decisions.