How to pay off your home loan faster: 14 practical steps

You make the repayment every month, then look at the balance and wonder why it's barely moved. Early in a home loan, much of that payment goes towards interest. Getting the balance down sooner changes how much interest you're charged next time.

Start with a change you can keep up. That might be an extra payment after payday, using the savings already in your offset, or checking whether your current rate is still competitive. You can combine those steps as your budget allows.

Below, we'll work through 14 options, what each involves and how to compare the savings. Keep your loan balance, rate and remaining term handy so you can test the figures against your own loan.

You don't need to work through every strategy before doing something useful. Choose the starting point that matches your situation, then use the detailed steps below.

If you're struggling with the required payment, start by speaking to your lender about help. Extra repayments can wait while you stabilise the budget. Moneysmart's mortgage repayment guidance explains the main options.

Regular extra payments and occasional lump sums both reduce the balance earlier. Their effect depends on when you pay them and whether you later take the money back out.

Here’s the first comparison I’d run: an $800k loan at an assumed 6.67% over 30 years. Change the extra monthly payment and keep everything else the same. The extra starts with the first payment and continues until the loan is cleared.

The examples in this guide use monthly repayments, unchanged example rates and no fees, with a smaller final payment where needed. Figures are rounded. Your lender generally calculates interest daily, and a changing rate or repayment changes the result.

Another $100 a month cuts about 20 months from this example. Another $500 cuts about 6 years and 8 months. I’d start with the amount you can keep paying after bills and an emergency buffer.

Enter your current balance, rate and years left in the calculator. Then try an extra $100, $500 or the amount you have available each month to see the estimated payoff date and interest saving.

A $10k lump sum after payment 24 on the same loan would cut about 12 months from the term and save roughly $52k interest, if you kept the regular payment unchanged.

Set aside any tax and upcoming expenses before deciding how much to use. A bonus or tax refund can be a useful opportunity, but it may also be the money you need for insurance, school costs or repairs.

If access matters, compare a linked offset with an extra loan repayment. The interest effect may be similar while the money stays there, but the account access and tax consequences can differ.

Check what your current loan lets you pay before transferring a large amount. Variable loans commonly provide more flexibility. Fixed loans can limit extra repayments and charge break costs when you exceed the allowance or end the fixed period early.

The allowance varies by product. Ask for the amount you can pay, the period it applies to and whether payments you've already made count towards it. A rate that looks attractive can be less useful if it restricts the repayments you intend to make.

A split loan puts part of your borrowing on a fixed rate and part on a variable rate. You can direct extra repayments to the variable portion while keeping a fixed rate on the other portion, subject to the loan's terms.

For an $800k loan, the table below shows 3 ways to divide the fixed and variable portions. Choose the split around the extra repayments and savings you expect during the fixed period.

Leave enough in the variable portion for the extra repayments and offset savings you expect. If it’s too small, you could run out of room to use those features.

Our home loan features guide and fixed rate guide explain the features to compare.

Interest only payments cover the interest for an agreed period. Unless you make extra payments, the balance stays the same during that time. The remaining debt then needs to be repaid over the years left on the loan.

There can be reasons to choose interest only payments, including some investment or construction arrangements. For a homeowner trying to clear the debt, compare the later payment as well as the lower initial payment.

Using the same $800k loan at 6.67%, 5 years of interest only payments followed by 25 years of principal and interest would look like this, assuming the same rate throughout both options.

The interest only option costs about $60k more interest in this example. Actual interest only products can have different rates and fees, so compare the specific offer. Moneysmart explains interest only loans.

Choose a payment above the minimum that still leaves money for ordinary expenses and unexpected bills. You can use the payment at a higher example rate to help set that amount.

For the $800k loan over 30 years, the payment at 6.67% is about $5,146 a month. At an assumed 8.67%, it would be about $6,248. Paying $6,248 while the actual rate remains 6.67% puts roughly another $1,102 a month towards the debt.

Check your loan permits the extra amount, then arrange the payment with your lender or set up a separate transfer. Keep the required repayment in place and make sure the extra transfer lands in the intended loan account.

Review the amount when your income or expenses change. If $1,102 extra would make the budget uncomfortable, test $100 or $500 instead. The useful amount is the one you can keep paying.

If the lender reduces your minimum after a rate cut, check whether you can keep your existing payment. Maintaining it puts the difference towards the balance. Confirm the payment instructions rather than assuming your direct debit will stay unchanged.

A 100% offset reduces the balance used to calculate interest while your money remains in a separate account. With a $150k loan and $20k in the linked offset, interest is calculated on $130k. You still owe $150k on the loan.

That can be useful for savings you want available, including an emergency fund or money set aside for annual bills. While the money is in the offset, it reduces interest. When you spend it, the interest benefit reduces too.

The average balance matters more than a large deposit that leaves the account the next day. At a constant 6% loan rate, $20k held in a 100% offset for a full year would reduce interest by about $1,200 before account costs. Compare that with any package fee or higher rate for the offset loan.

Redraw gives access to extra repayments you've already made into the loan, subject to the lender's terms. Check how much is available, any minimum withdrawal, fees and processing time. Keep money you need urgently in a form you can access when required.

If you may rent out the home later, speak to your accountant before moving money between the loan and your savings. What you use redrawn money for can matter for tax. Our offset account guide and Moneysmart's offset guidance explain the account comparison.

Look at several months of spending before choosing the extra amount. Include the bills that arrive quarterly or annually, such as rates, insurance, registration and school expenses.

For each annual bill, divide the expected amount by 12 and set that money aside monthly. If your annual insurance costs $2,400, that's $200 a month to allow for before increasing the loan payment.

Then look at changes you can maintain. Reviewing a large recurring bill may free up more than cutting lots of small purchases. Cancel unused services, compare insurance when it renews and decide which spending you value enough to keep.

Try the extra repayment for a few months. If you repeatedly need to redraw it to pay ordinary bills, lower the amount and adjust the budget. The aim is steady progress with enough cash available for the household.

Use the Moneysmart budget planner or your bank's transaction categories to work through the figures. Our account budgeting guide can help you organise separate bills and spending money.

I’d ask your current bank for a better rate before paying to move the loan. Have your balance, rate, repayment type and the features you need ready, along with a comparable alternative.

Ask what rate the lender can offer for your existing loan and when it would take effect. Get the revised terms in writing and check whether fees or features change.

If you receive a reduction, decide whether to keep your existing payment. That is the step that turns a lower interest charge into faster progress, provided the payment remains affordable.

A discharge request starts the process of leaving a loan. You can compare options and ask for a rate review before requesting one. If the existing lender's offer is still uncompetitive, compare the full refinance costs and timing.

Start with your current balance and remaining term. Compare a new loan over that same term so you can see what the rate and fees change.

If you have 23 years left and refinance into a fresh 30 years, the minimum payment may fall partly because you've added 7 years. That can help cash flow, but it works against an earlier payoff date unless you make higher payments.

Ask for the discharge, settlement, registration and application costs, plus any fixed rate break cost. Check whether the new loan charges for the offset or other features you need.

Compare 3 figures: what it costs to stay, what it costs to switch over the same term and what happens if you keep paying your current amount after switching. A lower rate can let more of the same payment reduce the balance.

Use actual quotes. An advertised discount or cashback may be less important than the ongoing cost. Our refinancing guide and reasons to refinance explain when a change may be worth considering.

Paying half the monthly amount every 2 weeks produces 26 half payments each year. That's the equivalent of 13 monthly payments rather than 12.

Lenders can calculate the fortnightly minimum differently. Ask which amount will be debited and what it adds up to over the year. Simply changing the frequency doesn't necessarily create an extra repayment.

Choose a schedule that fits payday and leaves funds available for the required payments. If you're already paying a monthly extra, compare the annual totals so you understand what the frequency change adds.

Adding fees or lenders mortgage insurance to the loan preserves cash upfront, but you then pay interest on that amount as well.

For example, financing another $15k over 30 years at the assumed 6.67% would add about $19.7k in interest if you made only the calculated payments. Ask for the actual premium and compare paying it upfront with adding it to the loan.

Compare paying a cost upfront with keeping enough money for settlement and emergencies. Using the last of your savings to reduce a loan can leave you short when another bill arrives.

If you're buying with a smaller deposit, check whether an LMI waiver or eligible guarantee changes the insurance cost. Use the LMI calculator as a starting point and get the actual lender quote. Our mortgage fee guide covers the costs to include.

Compare the product's rate, fees and repayment flexibility. A lender's size alone doesn't tell you whether its loan will suit the way you plan to repay it.

Check offset access, redraw rules, extra repayment limits and how you would get help if something went wrong. If you need a branch or a particular transaction feature, include that in the comparison.

Banks and non-bank lenders can have different account structures. If you're holding savings in a linked account, confirm who holds the deposit and what protection applies. APRA's Financial Claims Scheme guidance explains the protection for eligible deposits, including the $250k limit per account holder per authorised institution.

For readers who also want to consider how their money is used, our ethical banking guide covers another part of the decision. Keep the loan cost and practical features visible alongside those preferences.

Putting spare money towards your mortgage reduces interest at your loan rate. Investing can produce a return, but it can also lose value and may bring tax, fees or additional borrowing.

Start with the purpose of the money and when you need it. Money set aside for an urgent home repair serves a different purpose from money you can leave invested for years.

If you're comparing an investment with an extra repayment, look at the investment's possible return after tax and costs, and what happens if it falls in value. Test what happens to your plan if the investment has a poor year.

An accountant or licensed financial adviser can help with that decision. If you're considering a rental property, our investment loan guide and rentvesting guide explain the extra debt and ownership costs to allow for.

Tell us if you expect a change in income, a large expense, a sale or a move that would turn this home into a rental. Those plans can change whether an offset, extra repayments or a different loan structure will suit you.

If the current loan already works well, the most useful change may be how you use it. There is no need to refinance purely to make an extra repayment that your existing loan already permits.

A shorter contractual term makes the higher repayment compulsory. That can help you stay on track, but it also leaves less flexibility if income falls or expenses rise.

Compare it with keeping a longer contractual term and making voluntary extra repayments. Where the actual payments and rate are the same, the balance can reduce at the same pace; the difference is the minimum you're committed to pay.

Before shortening the term, test the payment against annual bills, leave, repairs and a period of lower income. Keep a cash buffer and review the plan when your circumstances change.

Write down the payoff date you're working towards, then check progress at each rate review. A plan that remains affordable is easier to maintain through the years it takes to repay a home loan.

Your regular principal and interest payment covers the interest charged and reduces the amount you owe. Principal is simply the loan balance. As that balance falls, less interest is charged, so more of an unchanged payment can go towards clearing the debt.

Take an $800k loan at an assumed 6.67% over 30 years. The monthly payment is about $5,146. In the first month, roughly $4,447 covers interest and $700 reduces the balance.

Pay another $100 and about $800 reduces the balance that month. Keep making the extra payment and the interest saving builds as the loan becomes smaller.

On that example, paying only the minimum would cost about $1.05m in interest over 30 years, on top of repaying the $800k borrowed. Early payments are mostly interest because you're paying it on a large balance.

That doesn't mean the payment has gone missing. Check your statement for the opening balance, interest, fees, payments and closing balance. If you use an offset, check its balance and confirm it's linked to the right loan account too.

Keep the $800k loan at 6.67% and pay the minimum for the full 30 years. Your monthly payment stays around $5,146, but the amount reducing your debt grows as the balance falls.

This is why an extra payment early in the loan can make such a difference: it reduces the balance on which future interest is calculated. On this example, more than half of each regular payment starts reducing the debt during year 20. You can bring that point forward with affordable extra payments or money held in an offset.

Use your current balance, rate and remaining term when planning your own payments. Keep cash available for bills and emergencies so you can maintain the plan.

Our repayment calculation guide explains the calculation in more detail. For a step by step comparison before switching, use how refinancing works.