Buying a home is a huge milestone, but financing a home loan can feel like a lifelong commitment. The good news? You don't have to stick to your lender's 25–30-year term. With smart planning and a few practical strategies, you can finance home loan faster—saving you thousands in interest and achieving financial freedom sooner.
In this guide, we'll explore proven mortgage reduction strategies tailored for Australian homeowners.
1. Make Fortnightly Instead of Monthly Repayments
Switching from monthly to fortnightly repayments is one of the easiest ways to reduce your home loan term. Here's how it works:
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There are 12 months in a year = 12 repayments
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There are 26 fortnights = 13 full monthly repayments over a year
That one extra repayment per year can shave years off your loan and save thousands in interest.
Example: On a $500,000 loan at 6% interest, fortnightly payments can reduce the loan term by up to 4–5 years.
2. Make Extra Repayments Whenever Possible
Any extra money you can put toward your loan—whether it's $50 a week or $5,000 from a tax refund—directly reduces your loan balance and interest.
Tips:
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Set up automatic weekly or fortnightly transfers
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Use windfalls like bonuses, inheritances, or cashback deals
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Add a little extra to every scheduled repayment
Many Australian lenders allow additional repayments on variable loans without penalty. For fixed-rate loans, check with your lender first—some have limits.
3. Use an Offset Account
An offset account is a transaction account linked to your mortgage. The balance in this account offsets the principal on your home loan when calculating interest.
Example: If you owe $400,000 and have $20,000 in your offset account, you only pay interest on $380,000.
This is a powerful tool for borrowers who maintain savings or have consistent income flows. It works best when:
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Your salary is deposited into the offset account
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You limit withdrawals
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You use a credit card (paid off monthly) for living expenses
4. Refinance for a Better Deal
If your loan is more than a few years old, you could be paying too much interest. Refinancing to a lower rate can dramatically reduce your repayments or allow you to pay down the loan faster.
What to compare:
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Interest rates
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Fees (application, discharge, ongoing)
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Flexibility (offset, redraw, extra repayment options)
Pro tip: Don't just refinance to reduce repayments—keep paying your original repayment amount on the new lower rate to accelerate payoff.
5. Make Lump Sum Payments Early
Because home loan interest compounds daily, early payments have a bigger impact. A $10,000 lump sum in year 2 saves much more interest than the same amount paid in year 15.
Ideal times to make lump sum payments:
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After selling an asset
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After a promotion or bonus
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During tax time
Ask your lender if there are any penalties or limits for lump sum contributions, especially on fixed-rate loans.
6. Avoid Interest-Only Periods
Interest-only home loans may seem attractive short-term, but they don't reduce your principal. You're just delaying repayment.
If your goal is to finance your home loan faster, stick to principal and interest repayments. Interest-only loans are typically used for investment properties where tax deductions apply—not ideal for owner-occupiers looking to build equity quickly.
7. Live Below Your Means
It's not a financial product—but your lifestyle can be the biggest game changer.
Here's how to stay on track:
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Create a monthly budget
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Direct any savings toward your home loan
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Delay major upgrades or discretionary spending
Every dollar you save now reduces your debt—and the faster you reduce debt, the faster you gain financial freedom.
Conclusion
Paying off your home loan early isn't just a dream—it's a smart, achievable goal. By using these mortgage reduction strategies, you can finance your home loan faster, build equity sooner, and save thousands in interest.
Remember: Every extra repayment counts. Start small, stay consistent, and watch your loan balance shrink.
