12 Smart Strategies to Pay Off Your Mortgage Faster and Save Thousands

The average Australian mortgage takes over 25 years to pay off, with homeowners potentially spending more than $400,000 in interest on a $500,000 loan. But what if you could cut years, even a decade, off your mortgage and save tens of thousands of dollars with a few simple strategies?

In this post, we’ll cover 12 practical tips that can help you reduce your loan term, build equity faster, and free yourself from the financial weight of a 30-year mortgage. Whether you’re a first-time buyer or have been paying off your home for years, these tips can make a huge difference.

1. Make Fortnightly Payments

Instead of making one monthly mortgage payment, split it in half and pay every two weeks. Since there are 26 fortnights in a year, you’ll make the equivalent of 13 full monthly payments instead of 12.

Impact: On a $500,000 loan at 5% interest, this strategy could save you over $70,000 in interest and cut your loan term by four to five years.

2. Put Windfalls Toward Your Mortgage

Bonuses, tax refunds, or small inheritances can make a big dent in your mortgage if applied directly to the principal.

Example: A $5,000 bonus applied to a $500,000 mortgage at 5% interest in the first five years could save you over $15,000 in interest and cut six months off your loan term.

3. Round Up Your Payments

If your mortgage payment is $2,380 per month, rounding it up to $2,400 ($20 extra per month) means an extra $240 per year going directly to your principal, reducing interest over time.

4. Refinance to a Lower Interest Rate

If interest rates drop or your credit profile improves, refinancing could save you tens of thousands of dollars.

Example: Reducing your interest rate by just 1% on a $500,000 loan could save you about $90,000 in interest over 30 years.

5. Make Extra Payments Early

In the early years of your mortgage, most payments go toward interest. Extra payments during this period have a significant impact.

Example: An extra $10,000 payment in the first five years of a $500,000 loan at 5% could save over $30,000 in interest and shorten your loan term by nearly two years.

6. Use an Offset or Redraw Facility

An offset account links your savings to your mortgage, reducing the interest charged.

Example: A $500,000 loan with $20,000 in an offset account means you’re only charged interest on $480,000, saving you thousands over time.

7. Consider an Investment Property

If you have equity in your home, you might leverage it to buy a positively geared investment property. The extra rental income could be used to pay down your mortgage faster.

8. Avoid Lifestyle Inflation

When you get a raise or bonus, resist the urge to upgrade your lifestyle. Instead, put that extra money toward your mortgage.

Example: Increasing your monthly mortgage payment by $500 after a raise could cut almost 10 years off a $500,000 mortgage at 5%.

9. Plan for One or Two Extra Payments Per Year

Strategically making an extra payment once or twice a year can significantly reduce your loan term.

Example: A single $5,000 extra payment per year on a $500,000 mortgage at 5% could save over $100,000 in interest and cut five to six years off your loan.

10. Automate Extra Payments

Set up automatic transfers to ensure consistency in extra payments. Even small, consistent contributions add up significantly over time.

11. Regularly Review Your Loan

Mortgage products and interest rates change constantly. Regularly reviewing your loan can ensure you’re not overpaying.

Tip: Call your bank or mortgage broker annually to negotiate a better rate or switch to a more competitive loan.

12. Track Your Progress

Use mortgage calculators or apps to visualise how extra repayments impact your loan term and interest savings. Seeing your progress can keep you motivated to stick to your repayment strategy.

Final Thoughts

Paying off your mortgage faster isn’t about making huge sacrifices—it’s about making small, smart changes that add up over time. Implementing even a few of these strategies can help you save tens (or even hundreds) of thousands of dollars in interest and give you financial freedom sooner.

If you need professional financial advice, don’t hesitate to reach out—we can connect you with the right experts to help you get ahead.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult with a qualified financial professional before making any mortgage or investment decisions