The length of your home loan has a big impact on the total cost of buying your home. The longer you take to repay, the more interest you’ll pay over the life of the loan – meaning a higher overall cost. Paying off your mortgage sooner can significantly reduce these costs and potentially save you tens of thousands of dollars.
Our how long to pay off your mortgage calculator gives an idea of how long it will take you repay your home loan based on your current repayments and interest rate, and how much time and money you could save by increasing your repayments.
How do I use the how long to pay off mortgage calculator?
Using our calculator is simple. You just need to enter:
- The amount you still owe on your loan
- Your interest rate
- Your current repayment amount
- How often you make repayments (weekly, fortnightly or monthly)
The calculator will then show you how long it will take to pay off your loan, the total interest you’ll pay over that time and the overall cost of your loan.
It also gives you the chance to play around with different repayment amounts and see how you could reduce the term of your loan and save on interest payments.
Note: This calculator uses fixed interest rates and can’t factor in changes to variable rates over time.
How can I reduce the time it takes to pay off my home loan?
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Increase your repayment amount
If you’re able to, increasing your regular repayments is one of the simplest ways to reduce your home loan balance faster. Even a small increase can make a meaningful difference over time, and can be easily adjusted if your circumstances change.
Example:
Let’s say you have a $400,000 mortgage with a 6.5% p.a. interest rate and make monthly repayments of $3,500. In this scenario, paying off your loan would take you 14 years and 11 months – and would cost you $225,278 in interest.
If you choose to pay an extra $100 per month, increasing your repayment to $3,600 per month, you could shave eight months off your loan term and save more than $11,500 on interest.
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Make large lump sum repayments
If you receive a financial windfall such as an inheritance, work bonus or tax refund, one option is to put it towards a lump-sum repayment on your home loan. While this doesn’t change your regular repayments, it reduces your outstanding loan balance, which can shorten your loan term and significantly cut the amount of interest you pay.
Example:
Imagine you’ve recently bought a property with a $600,000 home loan. Assuming a 5.5% p.a. interest rate and monthly repayments of $4,000, your loan term would be 21 years and 3 months and the total interest you would pay would be $417,438.
You then come into $50,000 and decide to put it towards your home loan. This reduces your loan balance to $550,000 – and even with your monthly repayment and interest rate unchanged, gives you a new loan term of 18 months and 2 months and total interest of $320,191.
That’s a saving of more than $97,000 in interest, and you’d own your home over three years sooner.
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Change your payment frequency
Switching to fortnightly repayments from monthly ones can work out cheaper in the long run because you’ll end up making more payments each year – potentially without even realising it.
This is because there are 26 fortnights in a year, which adds up to the equivalent of 13 months’ worth of repayments, while you only make 12 monthly repayment each years.
Example:
You have $300,000 remaining on your home loan, with an interest rate of 6% p.a. and repayment of $2,400 monthly. Continuing like this, loan would be paid off in 16 years and 5 months with $171,974 total interest payable.
However, if you switched to fortnightly payments of $1,200 (half of your monthly payment), your loan term would reduce to 14 years and 10 fortnights and interest to $147,821.
By making this one small change, you’d be mortgage free almost two years sooner and save over $24,000.
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Use an offset account
An offset account reduces the interest you pay on your home loan by lowering the loan balance that interest is calculated on.
This means you pay interest on your loan amount minus the money you have in your offset account. With less interest to pay, more of your repayments go towards reducing the loan itself, helping you pay it off sooner.
Example:
Let’s look at a scenario where you have a $700,000 home loan payable over 30 years with an interest rate of 5.7% p.a. Your monthly repayments would be just over $4,000.
If you have $15,000 in an offset account linked to your mortgage, you’ll only be charged interest on $685,000 – not the full $700,000. This could save you around $64,035 in interest and reduce your loan term by 1 year and 3 months, meaning you’d pay off your loan in about 28 years and 9 months.
You can see how much you could save with an offset account by trying our home loan offset calculator.
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Refinance to a lower rate
Another way to save on your mortgage is by refinancing to a loan with a lower interest rate. If you keep your repayments the same, you’ll effectively be making extra repayments each month as more of your payment goes towards reducing the principal. This helps you pay down your home loan faster and reduces the overall cost.
However, it’s important to consider all the costs involved in refinancing, such as fees and charges, before making the switch.
Example:
Suppose you have a $500,000 loan with an interest rate of 6.2% p.a. and make monthly repayments of $4,200. At this rate, your loan will be paid off in 15 years and 6 months, and you will have paid $278,097 in interest.
By refinancing to a loan with an interest rate of 5.9% p.a., while keeping your monthly repayment the same, your loan term would reduce to 15 years and the total interest paid would drop to $253,783. That’s a saving of $24,314 in interest over the life of the loan.
