| Standard | With extra | |
|---|---|---|
| Monthly repayment | $2,998 | $3,498 |
| Loan term | 30 years | 24.5 years |
| Total interest | $579k | $492k |
| Total paid | $1,079k | $992k |
Every extra dollar you pay reduces your loan balance, which reduces the interest charged the next day. Australian lenders calculate interest daily on the outstanding balance — so extra repayments have an immediate and compounding effect.
In the early years of a home loan, the majority of each repayment covers interest rather than principal. Extra repayments change this ratio faster — meaning more of each future repayment goes to principal reduction.
The key insight is that early extra repayments save the most. A $500 extra payment in year one saves more total interest than a $500 extra payment in year 20, because it reduces the balance that interest compounds on for the entire remaining loan term.
Most variable rate home loans allow unlimited extra repayments without penalty. Fixed rate loans typically cap extra repayments at $10,000 to $30,000 per year — exceeding this triggers a break cost. Lendology checks your specific loan conditions before recommending extra repayments.
The saving depends on your loan balance, rate and how much extra you pay. On a $500,000 loan at 6% over 30 years, an extra $500 per month saves approximately $87,000 in interest and cuts 5.5 years off the loan. The earlier you start paying extra, the greater the compounding benefit.
Mathematically identical — both reduce the interest-bearing balance by the same amount. An offset account gives you easier access to the funds if needed. Extra repayments permanently reduce the loan balance. If you may need the money, use an offset. If you want to force the saving, pay extra.
A lump sum directly reduces your loan balance, which reduces the daily interest charged and either shortens your loan term or reduces your minimum repayment going forward. Use the calculator above to see the impact of a specific lump sum on your loan.
Yes. Fortnightly repayments (26 per year) result in the equivalent of 13 monthly payments per year — one extra payment annually. This alone cuts approximately 3 to 4 years from a 30-year loan. Weekly repayments provide a similar benefit with slightly faster interest reduction due to more frequent balance updates.