Extra repayment calculator
Your loan
Assumes a principal-and-interest loan with monthly repayments and a constant rate. Fixed loans cap extra repayments: NAB publishes $20,000 per fixed period, St.George and BankSA $30,000.
Summary
The same saving is available by keeping the money in an offset account instead, with the money still accessible. See offset vs redraw.
Paying extra, or paying less?
A licensed broker partner can check whether a lower rate on the same term beats the extra repayments you are making, and which lenders let you keep paying extra while fixed.
How extra repayments cut a home loan
Interest on a home loan is calculated daily on the balance. Any amount paid above the minimum reduces that balance immediately, so every day after that is charged on a smaller figure, and the minimum repayment, which was sized to clear the loan over the full term, now clears it early. The effect compounds: on a $500,000 loan at 6% p.a. over 30 years, an extra $300 a month finishes the loan about six years early and saves roughly $141,000 of interest. Moneysmart's mortgage calculator and the bank calculators in the search results all do this arithmetic; what they do not tell you is where the caps are.
The caps on extra repayments while fixed
Variable loans are uncapped at every major lender. Fixed loans are not. NAB publishes that its fixed rate loans allow up to $20,000 in extra repayments during a fixed rate period without incurring economic costs. St.George and BankSA publish a prepayment threshold of $30,000 for the entire fixed period. Westpac publishes that a break cost may be charged for pre-payments above the agreed threshold, and that it can be charged more than once in a fixed period. Home Loan Experts' guide lists other lenders' caps at $5,000 a year or 5% of the loan, or a set monthly amount. If you have a split loan, direct the extra money to the variable split or its offset and leave the fixed split at its minimum. The break costs guide covers what happens above the cap.
Extra repayments, offset or a shorter term?
All three reach the same place. Extra repayments and offset both reduce the balance interest is charged on; offset keeps the money accessible and, for a property that may become an investment, keeps the loan's purpose intact. Refinancing to a lower rate saves interest without any extra cash, provided you keep the remaining term rather than resetting to 30 years, and the refinancing guide covers when the switching costs are worth it. The fortnightly repayments guide explains the one trick that works like an extra repayment without feeling like one.
Related guides and calculators
Extra repayment FAQs
What happens if I pay extra on my home loan?
Every extra dollar comes straight off the principal, so less interest is charged from the next day and the loan finishes earlier. On a variable loan there is no cap. On a fixed loan there usually is: NAB publishes that its fixed rate loans allow up to $20,000 of extra repayments during the fixed period without economic costs, and St.George and BankSA publish a $30,000 prepayment threshold for the whole fixed period. Go over the cap and a break cost can apply.
What happens if I pay an extra $300 a month on my mortgage?
On a $500,000 loan at 6% p.a. over 30 years, the minimum repayment is about $2,998 a month. Adding $300 a month clears the loan in about 23 years and 8 months instead of 30, and saves roughly $141,000 of interest. Put your own numbers in above; the saving grows with the rate and the remaining term.
How do I pay off a $300,000 mortgage in 10 years?
At 6% p.a., a $300,000 loan repaid over 10 years needs about $3,331 a month, against about $1,799 on a 30-year schedule. The extra $1,532 a month is the price of finishing 20 years early, and it saves roughly $248,000 of interest. Most people get part of the way there with a mix of extra repayments, an offset account, and refinancing to a lower rate without extending the term.
Are extra repayments better than an offset account?
They save the same interest, because both reduce the balance the interest is charged on. The difference is access and tax. Extra repayments on the loan can be taken back through redraw if the loan allows it; offset money is yours in a transaction account. For an investment property, or a home you might rent out later, keep the money in offset rather than paying down the loan, because redrawing changes the purpose of the borrowing. The offset vs redraw guide explains why.
Can I make extra repayments on a fixed rate loan?
Up to the lender’s cap, yes. NAB publishes up to $20,000 during the fixed period; St.George and BankSA publish a $30,000 prepayment threshold for the whole fixed period; Westpac publishes a prepayment threshold above which a break cost may be charged. Above the cap, the lender can charge a break cost, and Westpac warns it can be charged more than once in a fixed period. Put extra money in an offset on the variable split instead, if you have one.
How much will I need to repay monthly on a $1,000,000 mortgage?
About $5,996 a month at 6% p.a. over 30 years on principal and interest, or $5,000 a month interest-only. Lenders assess it at a higher rate than that. The home loan repayment calculator runs any amount, rate and term.