Paying off your home loan faster is less about chasing the lowest rate and more about how you structure your loan and where your money sits.
Most borrowers in Mount Eliza and across Australia focus on securing a low interest rate and then leave the loan untouched for years. The difference between someone who clears their mortgage in 20 years and someone still paying at 30 usually comes down to offset use, repayment structure, and a few deliberate choices made early.
Does an offset account actually reduce your loan term?
An offset account reduces the interest you're charged each day, which means more of each repayment goes toward the principal. If you keep $30,000 in a linked offset and your loan balance is $600,000, you're only charged interest on $570,000. At current variable rates, that difference can shorten your loan term by several years without changing your repayment amount.
In our experience, clients who treat their offset as a holding account for all income and expenses rather than a savings account tend to see the most impact. Salary, rental income, and any other cash flow should pass through the offset before being spent. The longer funds sit there, the more interest you avoid.
If you're considering refinancing to access an offset, make sure the rate and fees justify the switch. Some lenders offer partial offsets or cap the amount that counts, which dilutes the benefit.
Paying fortnightly instead of monthly
Switching from monthly to fortnightly repayments results in 26 half-payments per year, which equals 13 full monthly payments instead of 12. You're making one extra payment annually without feeling the pinch in your cash flow.
Consider a buyer who refinanced a $500,000 loan and switched to fortnightly repayments at the same time. Over the life of the loan, that one extra payment per year can reduce the term by several years, depending on the rate and remaining balance. The impact grows the earlier you start.
Not every lender calculates fortnightly repayments this way. Some divide your monthly amount by two, which doesn't create the extra payment. Check with your lender or broker to confirm the repayment is calculated as annual repayments divided by 26, not monthly divided by two.
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Should you fix part of your loan to force discipline?
A split loan lets you fix a portion at a set rate while keeping the rest variable with an offset. The fixed portion removes access to extra repayments in most cases, but it also removes temptation. If you tend to redraw funds or spend what's sitting in offset, fixing part of your loan can act as a forced saving mechanism.
In a scenario like this, a borrower with a $700,000 loan might fix $400,000 at a rate with no offset or extra repayments allowed, and keep $300,000 variable with full offset and redraw. The fixed portion gets paid down on schedule without interference, while the variable portion gives flexibility for lump sums or everyday cash flow.
The downside is that fixed rates don't benefit from offset, and you can't make extra repayments without triggering break costs. If your income is stable and you want to lock in progress on a chunk of your loan, a split can work. If you prefer access and flexibility, keep it variable with offset and rely on discipline instead.
You can explore your home loan options and whether a split structure suits your situation before committing.
Making lump sum repayments when you can
Tax refunds, bonuses, inheritance, or the sale of another asset are opportunities to make lump sum repayments that cut years off your loan term. A $20,000 lump sum payment on a $650,000 loan can reduce your term by more than a year, depending on how far into the loan you are.
The earlier you make a lump sum payment, the more impact it has. Interest is calculated daily on your outstanding balance, so reducing the principal early means you avoid interest on that amount for the entire remaining term.
If your loan allows unlimited extra repayments without penalty, there's no downside to paying lump sums as they come in. If you're on a fixed rate, check your loan contract for annual caps on extra repayments. Most fixed loans allow $10,000 to $30,000 in extras per year before break costs apply.
Avoid redrawing unless it's necessary
Redraw facilities let you access extra repayments you've made, which can be useful in an emergency but counterproductive if used casually. Every time you redraw, you're adding that amount back to your loan balance and extending the time it takes to pay off the mortgage.
We regularly see this with clients who make extra repayments throughout the year and then redraw for holidays or renovations. The loan balance climbs back up, and the progress made earlier is undone. If you need access to cash for non-essential spending, keep it in your offset instead of paying it onto the loan. That way it still reduces your interest without being locked in.
If you're consolidating debt or covering genuine expenses, redraw can make sense. Just don't treat it like a savings account you can dip into whenever something comes up.
Reviewing your loan structure every few years
Rates, lenders, and loan features change. A loan that worked well three years ago might not be the most efficient option now. If your lender has increased your rate above what new customers are getting, or if you're missing features like offset or unlimited extras, it might be time for a loan health check.
Refinancing to a lower rate or adding an offset can make a material difference to how quickly you pay off your loan, but only if the savings outweigh the costs. Application fees, discharge fees, and valuation costs can add up to a few thousand dollars, so the rate difference needs to be significant enough to recover those costs within a reasonable timeframe.
We also see borrowers who refinanced years ago and haven't reviewed their loan since. Lenders adjust their rates and policies regularly, and what was competitive at the time might not be anymore. A quick comparison every two to three years keeps you informed and makes sure you're not paying more than you need to.
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Frequently Asked Questions
How does an offset account help me pay off my loan faster?
An offset account reduces the balance on which interest is calculated each day. The less interest you're charged, the more of each repayment goes toward reducing your principal, which shortens your loan term over time.
Does paying fortnightly really make a difference?
Yes. Fortnightly repayments result in 26 half-payments per year, which equals 13 full monthly payments instead of 12. That extra payment each year can reduce your loan term by several years depending on your balance and rate.
Should I fix part of my loan if I want to pay it off faster?
A split loan can help if you need discipline, as the fixed portion doesn't allow extra repayments or redraw. However, the fixed portion won't benefit from offset, so it depends on whether you value structure over flexibility.
When should I make lump sum repayments?
The earlier you make a lump sum repayment, the more interest you save over the life of the loan. Tax refunds, bonuses, or windfalls are ideal opportunities, as long as your loan allows extra repayments without penalty.
How often should I review my home loan?
Every two to three years is sensible. Lenders adjust rates and features regularly, and refinancing to a lower rate or adding an offset can save you thousands if the rate difference outweighs the switching costs.
