Pay off your loan faster
At Moore Finance Edge, we help you reach your financial goals faster by showing you how to make the most of property and smart debt strategies.
Paying off your home loan faster can save you thousands of dollars in interest and help you reach your financial goals sooner. There are a number of smart debt strategies you can use to reduce your loan term and overall costs, including:
Utilising an Offset Account; and/or
On this page, we explore practical methods to accelerate your mortgage repayment, complete with real-world debt strategies compared to a baseline scenario for comparison. These examples highlight the potential savings in interest and time, empowering you to choose the approach that best suits your financial goals.
If you are like us and you want the data without all the words, then here is a summary of the smart debt strategies data from the scenarios outlined below. For more information on each debt strategy, keep reading. To jump to a specific strategy, use the links above.
It is recommended that you try to view this table using a web browser. The table is too large to be optimised for a mobile device.
Smart Debt Strategies Snapshot
Baseline Scenario
The baseline scenario demonstrates the cost of a standard home loan to illustrate potential savings when applying various strategies below.
For a $550,000 loan with a 5.9% p.a. interest rate over 30 years, the monthly repayment is $3,263. Over the life of the loan, total repayments equal $1,174,411 including $624,411 in interest.
These figures highlight the significant cost of borrowing and serve as a benchmark to show how adjustments like extra repayments, reduced loan terms, or lower interest rates can help save time and money. Interest and time saved in the debt strategies below refer is in reference to the baseline scenario.
Please note, the information on this page is for illustration purposes only; individual circumstances will vary. If you circumstances differ from those illustrated, your potential savings will also differ. For example, a higher interest rate will mean you pay more interest, but there is also an opportunity to save more interest using these debt strategies.
Values are for illustrative purposes and monthly repayments have been rounded to the nearest dollar simplify each scenario. In addition, the loan term (where reduced) has been rounded up to the nearest month to ensure the loan is repaid. The rounded values have been used to find the total repayments and total interest paid. Scenario's do not take into account any additional bank fees or charges that may apply.
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term: 360 Months (30 years)
Monthly Repayment: $3,263
Total Repayments: $1,174,680
Total Interest Paid: $624,680
Debt Strategy: Reducing Your Interest Rate
How Does Reducing the Interest Rate Save Money on My Home Loan?
When you lower the interest rate on your home loan, you pay less interest each month. Assuming you maintain the same repayment amount, more of your payment goes towards the principal balance. This helps you pay off the loan faster, shortening the term of the loan. By reducing the interest rate, you also save money over the life of the loan because less interest accrues overall.
What are the benefits of reducing the interest rate?
Lower interest rates can reduce your monthly payment, freeing up cash for extra repayments or other financial goals.
What are the risks of reducing the interest rate?
Reducing your interest rate may come with refinancing costs, exit fees, or higher upfront charges. It's important to evaluate the entire loan package, not just the interest rate. Focusing solely on the interest rate might cause you to overlook additional fees, such as ongoing maintenance charges, or miss out on valuable loan features like offset accounts or flexible repayment options. Always consider the full scope of the loan to ensure you're truly getting the best deal for your financial situation.
Reduce your interest rate by 0.5% (to 5.4%) and adjust your minimum monthly repayments.
Loan Amount: $550,000
Interest Rate: 5.4% p.a.
Monthly Repayment: $3,089
Original Loan Term: 360 Months
Total Repayments: $1,112,040
Total Interest Paid: $562,040
Interest Saved: $62,640
Time Saved: 0 months
Reduce your interest rate by 0.5% (to 5.4%) and continue to make the monthly baseline repayment amount.
Loan Amount: $550,000
Interest Rate: 5.4% p.a.
Monthly Repayment: $3,263 (baseline repayment)
Reduced Loan Term: 317 Months (26 years, 5 months)
Total Repayments: $1,034,371
Total Interest Paid: $484,371
Interest Saved: $140,309
Time Saved: 43 Months (3 years, 7 months)
Debt Strategy: Reducing Your Loan Term
How Does Reducing the Loan Term Save on Interest?
When you shorten the term of your home loan, you’re committing to paying it off faster, which reduces the amount of interest you’ll pay over the life of the loan. The faster you repay the principal, the less total interest you’ll pay.
What are the benefits of reducing the loan term?
You will build equity in your property much faster and you will be debt-free sooner.
What are the risks of reducing the loan term?
While you save on interest, your monthly payments will be higher, so you need to make sure this fits within your budget. It’s a bigger commitment upfront, but the long-term financial benefits might be worth it.
Reduce your loan term to 25 years increases your monthly repayments but saves time and interest paid.
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 300 Months (25 Years)
Monthly Repayment: $3,511
Total Repayments: $1,053,300
Total Interest Paid: $503,300
Interest Saved: $121,380
Time Saved: 60 Months (5 years)
Debt Strategy: Increasing Your Loan Repayments
How Does Increasing Loan Repayments Help Me Pay Off My Mortgage Faster?
Increasing your loan repayments is a great way to shorten the term of your mortgage. Paying more each month reduces the principal balance faster, which in turn reduces the amount of interest that will be paid over the life of the loan.
What are the benefits of increasing repayments?
You’ll build equity in your home faster and reduce your interest payments, all while gaining financial flexibility over time.
What are the risks of increasing repayments?
Higher payments can stretch your budget, but with a plan, you may be able to manage these payments without financial stress.
Increase your monthly repayment by $500 (from $3,263 to $3,763)
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 259 Months (21 years, 7 months)
Monthly Repayment: $3,763
Total Repayments: $974,876
Total Interest Paid: $424,876
Interest Saved: $199,804
Time Saved: 101 Months (8 years, 5 months)
Debt Strategy: Making Lump Sum Payments
How Does Making a Lump Sum Payment Help Me Pay Off My Mortgage Faster?
A lump sum payment directly reduces the principal balance of your mortgage, which in turn decreases the amount of interest charged over the remaining loan term.
Is It Better to Make a Lump Sum Payment on My Mortgage Early or Later?
Making a lump sum payment early in the loan term reduces your loan’s principal balance right away, which means less interest accrues over time. By paying down your mortgage earlier, you can significantly shorten the loan term and potentially save thousands in interest.
What are the benefits of making a lump sum payment?
You’ll reduce future monthly payments or even pay off your loan earlier, meaning you have more money to do the things you want to do.
What are the risks of making a lump sum payment?
It’s important not to drain your savings. We help you balance the benefits of a lump sum payment while ensuring you keep enough cash for emergencies. Additionally, we’ll check if your lender imposes any penalties for making large payments.
Paying a $20,000 lump sum after one year.
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 329 Months (27 years, 5 months)
Monthly Repayment: $3,263
Total Repayments: $1,073,527
Total Interest Paid: $523,527
Interest Saved: $101,153
Time Saved: 31 Months (2 years, 7 months)
Paying a $20,000 lump sum after five years.
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 334 Months (27 years, 10 months)
Monthly Repayment: $3,263
Total Repayments: $1,089,842
Total Interest Paid: $539,842
Interest Saved: $84,838
Time Saved: 26 Months (2 years, 2 months)
Debt Strategy: More Frequently Payments
How Do More Frequent Mortgage Payments Help Pay Off My Loan Faster?
Switching to fortnightly or weekly payments can reduce your mortgage term without much extra effort. Making more frequent payments reduces the principal faster, which limits the amount of interest that accrues between payments. By making more frequent payments, you are essentially making an extra month repayments per year.
What are the benefits of making more frequent payments?
This approach reduces interest, spreads payments more evenly, and helps you pay off your mortgage sooner. You may find that aligning your repayments with your income (either fortnightly or weekly) works well for budgeting and paying down your loan sooner.
What are the risks of making more frequent payments?
You’ll need to manage your cash flow carefully to handle more frequent payments, but this strategy helps with better financial planning.
Making fortnightly payments of $3,263 / 2 ≈ $1,632
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 638 Fortnights (24 years, 14 fortnights)
Fortnightly Repayment: $1,632
Total Repayments: $1,010,897
Total Interest Paid: $490,897
Interest Saved: $133,783
Time Saved: 142 Fortnights (5 years, 12 fortnights)
Making weekly payments of $3,263 / 4 ≈ $816
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 1273 Weeks (24 years, 25 weeks)
Weekly Repayment: $816
Total Repayments: $1,038,450
Total Interest Paid: $488,450
Interest Saved: $136,230
Time Saved: 287 Weeks (5 years, 27 weeks)
Debt Strategy: Utilising an Offset Account
How Does an Offset Account Reduce Interest on My Mortgage?
An offset account links to your mortgage and reduces the loan balance that is used to calculate interest. The more money you keep in the offset account, the less interest you’ll pay, because interest is charged on the loan balance minus the offset amount.
What are the benefits of using an offset account?
You save on interest while keeping your money accessible for other needs, providing flexibility and financial control. If you use more than one bank account to manage your money, finding a lender that allows multiple offsets might be a good choice for you. If you are a sole trader operating a small business with its own bank account, finding a lender that allows multiple offsets can be a great strategy to pay down your home loan sooner.
What are the risks of using an offset account?
Offset accounts may come with fees, and you need discipline to keep money in the account. We’ll help you choose the right loan and guide you on how to maximise the benefits of your offset account(s).
Average offset account(s) of $30,000
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 312 Months (26 years)
Monthly Repayment: $3,263
Total Repayments: $1,018,056
Total Interest Paid: $468,056
Interest Saved: $156,624
Time Saved: 48 months (4 years)
Average offset account(s) of $50,000
Loan Amount: $550,000
Interest Rate: 5.9% p.a.
Loan Term Reduced: 285 Months (23 years, 9 months)
Monthly Repayment: $3,263
Total Repayments: $929,955
Total Interest Paid: $379,955
Interest Saved: $244,725
Time Saved: 75 months (6 years, 3 months)
Debt Strategy: Use a Credit Card to Save Interest on My Home Loan
How Can I Use a Credit Card to Save Interest on My Home Loan?
You can use a credit card for everyday expenses and keep the money you would use for those payments in your offset account. This reduces the interest on your mortgage. The key is to pay off your credit card in full each month, so you avoid credit card interest.
What are the benefits of using a credit card to save interest?
You’ll extend the time your money is reducing your mortgage interest, and you might be able to earn credit card rewards like points or cashback depending on the type of credit card you select.
What are the risks of using a credit card to save interest?
If you don’t pay off your credit card balance in full each month, you’ll accrue high-interest charges, which can negate the savings on your mortgage. Staying disciplined is essential to reap the benefits. This strategy is not recommended if you have a poor records of managing your money.
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