| 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.
Every extra dollar you put into your home loan reduces the principal that interest is calculated on - and the effect compounds over time. On a $500,000 loan at 6%, an extra $200 per month saves over $85,000 in interest and cuts roughly 5 years off a 30-year loan. The earlier you start, the greater the impact.
Not all loans treat extra repayments equally. Variable rate loans generally allow unlimited extra repayments, while fixed rate loans typically cap them at $10,000 per year - go over that and you may trigger a break cost. Some lenders also restrict redraw on extra repayments, meaning you can put money in but can't easily get it back. These details matter when choosing a loan.
If you're weighing up extra repayments versus putting money into an offset account, the interest saving is identical - but offset funds remain fully accessible. For most borrowers with variable loans, an offset account gives you the same benefit with more flexibility. We help clients choose the right structure based on their actual cash flow and goals.
Enter your loan details and the extra amount you could put in each month. The calculator shows how many years you'll cut off your loan and how much interest you'll save. Even small amounts - $50 or $100 per month - make a surprising difference over time.
Want to see how extra repayments fit into your overall loan strategy? Book a chat and we'll model different scenarios using your actual loan and income - including whether refinancing to a lower rate would release even more to put toward extra repayments.