For many homeowners, a mortgage is the largest financial commitment they will ever take on. With home loan terms often spanning 25 to 30 years, the total interest paid can far exceed the original loan amount. However, there is one simple but highly effective way to cut years off your mortgage and save tens of thousands of dollars—making extra repayments.
Even a modest additional repayment of $50 per week can make a significant difference. By reducing the loan principal faster, borrowers lower the amount of interest they pay over time. A home loan repayment calculator can help visualise just how much money and time can be saved with this strategy.
This guide explores the impact of extra repayments, provides real-world examples of savings, and explains how to use a mortgage calculator to customise your repayment plan.
How Extra Repayments Work
Mortgage interest is compounded daily and calculated based on the outstanding loan balance. The faster you reduce the balance, the less interest you accrue, which speeds up your overall mortgage repayment.
Most variable-rate home loans allow extra repayments at any time, while fixed-rate loans may have restrictions. Checking with your lender before making additional payments is essential.
How Much Can an Extra $50 a Week Save?
Let’s compare two scenarios using a $500,000 mortgage with an interest rate of 6.0% p.a. over 30 years.
Scenario 1: Regular Repayments Only
- Monthly repayment: $2,997
- Total interest paid over 30 years: $559,078
- Total cost of the mortgage: $1,059,078
Scenario 2: Extra $50 a Week in Repayments
- New weekly repayment: +$50 extra ($200 extra per month)
- Loan term reduced by: 5 years and 5 months
- Total interest saved: $116,359
By simply adding an extra $50 per week, the borrower shaves more than five years off their mortgage and saves over $116,000 in interest.
Why Early Extra Repayments Have the Biggest Impact
Making additional payments at the start of your loan delivers the highest savings because interest is calculated on the principal. The sooner you reduce the loan balance, the less interest you pay over time.
Example of Early vs. Late Extra Repayments
| Extra Repayments Start Year | Interest Saved | Loan Term Reduction |
| Year 1 | $116,359 | 5 years 5 months |
| Year 10 | $72,400 | 4 years 2 months |
| Year 20 | $30,700 | 2 years 3 months |
The earlier extra repayments begin, the greater the savings.
How to Use a Mortgage Calculator to Plan Extra Repayments
A home loan repayment calculator helps determine how extra repayments affect loan duration and interest savings. Here’s how to use one:
Step 1: Enter Your Loan Details
- Loan amount
- Interest rate
- Loan term
- Repayment frequency (weekly, fortnightly, or monthly)
Step 2: Add Extra Repayments
- Enter the additional amount you plan to pay weekly, fortnightly, or monthly
- Some calculators allow lump sum payments to be included
Step 3: Compare Loan Scenarios
- The calculator will show:
- New loan term (how much earlier the loan is paid off)
- Total interest saved
- Updated repayment schedule
By adjusting repayment amounts, borrowers can tailor a plan that suits their budget while maximising savings.
Simple Strategies to Make Extra Repayments Work for You
Not everyone has extra cash available, but small changes can help free up funds for additional mortgage payments.
1. Round Up Repayments
Instead of paying $2,997 per month, round it up to $3,100. The extra $103 per month will significantly reduce the loan balance over time.
2. Allocate Bonuses or Tax Refunds
Directing annual work bonuses or tax refunds toward extra mortgage repayments can knock months off the loan termwith minimal effort.
3. Switch to Fortnightly Payments
By switching from monthly to fortnightly repayments, borrowers make one extra full repayment per year, reducing the loan term.
Example:
- Monthly repayment: $2,997
- Fortnightly repayment: $1,499
- Loan term reduction: ~4 years
- Total interest saved: ~$70,000
4. Cut Unnecessary Expenses
Reducing small, recurring expenses—like unused subscriptions or excessive takeaway spending—can free up cash for extra mortgage payments.
5. Use an Offset Account
An offset account reduces the amount of interest charged by linking a transaction account to your home loan. Rather than making extra repayments, keeping savings in an offset account achieves a similar effect while keeping funds accessible.
Paying Off Your Mortgage vs. Investing
Some homeowners wonder if extra mortgage payments are better than investing. While investments may yield higher returns, mortgage repayments provide guaranteed, tax-free savings.
Comparison Example:
- Mortgage rate: 6.0% p.a.
- Investment return: 7.0% p.a. (before tax)
Since investment returns are taxable while mortgage interest savings are not, paying down the mortgage is often a safer and more predictable financial decision.
What If You Need the Extra Money Later?
Borrowers sometimes hesitate to make extra repayments in case they need funds for emergencies. Two solutions provide flexibility:
- Redraw Facility – Allows borrowers to withdraw extra repayments if needed.
- Offset Account – Keeps savings accessible while still reducing loan interest.
Common Misconceptions About Extra Repayments
1. “I Need to Pay Large Amounts for It to Matter”
False. Even small, consistent extra repayments add up over time.
2. “I Can Only Make Extra Repayments Once a Year”
Incorrect. Most variable home loans allow extra repayments at any time. Fixed-rate loans may have limits, so check with your lender.
3. “Extra Repayments Don’t Help in the First Few Years”
Wrong. The earlier you start, the more interest you save.
Making extra repayments is one of the most effective strategies for reducing mortgage interest and shortening loan terms. Even an extra $50 per week can save over $116,000 in interest and cut more than five years off a 30-year loan.
Using a mortgage calculator to map out repayment scenarios helps borrowers tailor a plan that suits their financial situation while achieving long-term savings.
By implementing simple strategies—such as rounding up payments, using work bonuses, switching to fortnightly repayments, or using an offset account—homeowners can pay off their mortgage faster and achieve financial freedom sooner.