How long does it take to pay off a mortgage, with tips to make it faster

Luke Harris
May 5, 2022
Yard Financial Pty Ltd | ACN 623 357 513 | Australian Credit Licence 509481

Table of Contents

Wondering how long it takes to pay off a mortgage, and if there are any secrets to paying it off faster?

As one of the largest debts most people will carry in their lifetime, it makes sense to know how long you will be liable for repayments. It is also a good idea to explore strategies for paying it off as quickly as possible for the financial freedom it will give you. 

Read our Q&A explainer to understand:

  • What factors impact the length or term of your home loan.
  • Strategies to help you pay off your home loan quickly.

Factors affecting how quickly you can pay off your mortgage

The main factors which impact how long it takes to pay off your mortgage or home loans include:

The effect of a shorter or longer term on your home loan

The length or term of home loans in Australia is typically anywhere from 10 to 30 years. 

Opt for a shorter term and your repayments will be higher, but you will pay off the home loan a lot quicker. Using our online mortgage calculator we can see how loan term length impacts your repayments and total interest paid - assuming a loan amount of $500,000 and an interest rate of 3.50%. As you can see there is a significant difference in the total interest paid and monthly repayments over the lifetime of a 30 year vs 20 year loan vs 10 year loan. 

Loan term Monthly repayment Total interest paid
30 years $2,245 $308,280
20 years $2,900 $195,952
10 years $4,944 $93,315

The type of home loan you choose

Home loans come with conditions attached which can affect how much interest you pay over the term of the loan. Variable rate home loans generally have lower interest rates as well as additional features - such as an offset account and redraw facility - which all combine to help lower the amount of interest you pay, which shortens the term of the loan. Fixed rate home loans tend to have less flexibility or features and higher interest rates - so are less likely to help pay off your mortgage sooner. You also have the option of a split rate loan - which has elements of a variable and a fixed rate loan, so you can benefit from both products.  

Principal amount

The principal is the total amount you have borrowed from your lender. If you have a comparatively small deposit - less than 20% - you will have a larger principal to repay. This means you will pay more interest over the life of the loan, and your lender is likely to require you to pay lenders mortgage insurance (LMI). LMI is generally required for a loan exceeding 80% of the value of the property.

A higher interest rate

The interest you pay on your home loan is the way lenders make a profit from loaning you money. Because of competition in the home loan market there is no ‘standardised’ or set interest rate on a home loan. Lenders set their rates on the base rate set by the Reserve Bank of Australia (RBA), and these vary depending on the type of loan and your risk profile.  You can use our home loan payment calculator to provide an estimate of your loan repayments, the total amount of interest you will pay over the life of the loan and how quickly you will pay down the principal over the life of the loan. 

Repayment frequency

Monthly repayments are the typical mortgage repayments required on home loans, but you should consider the benefits of fortnightly repayments - assuming they align with your personal circumstances. Choosing an increased mortgage repayment frequency will save you money on interest and decrease the overall term of your loan.

Now let’s look at some concrete examples of ways to pay off your mortgage faster. 

Ways to pay off your home loan faster

Paying off your mortgage - or home loan - as quickly as possible will give you financial freedom sooner. Use our list of practical tips to help you pay off your mortgage as fast as possible.

Increase your repayment frequency 

If your lender allows it, you should consider increasing the frequency of your repayments to fortnightly. Why? Because there are 26 fortnights in a year, if you switch to paying every two weeks you will be effectively making an extra month's repayment each year. This helps save you money on interest and decrease the overall term of your loan.

Make additional lump sum payments

If you can afford to, making extra repayments to your home loan will help pay your mortgage off quicker. This could be from a windfall such as an inheritance, tax return or a salary bonus. Extra lump sums like these can help cut years off the term of your home loan, especially in the early stages of a typical 30 year principal and interest loan term. You could also make additional regular repayments if your lender allows this. 

Example: If you paid $250 extra a month on a 30 year loan term for a mortgage of $500,000, assuming an interest rate of 2.24% p.a. you would:

  • Save $31,658 in interest payments.
  • Pay off your loan 25 years 4 months, which is 4 years and 8 months faster.

We offer unlimited additional repayments on our variable rate loans, and if you have a redraw facility you have instant, free access to these funds via our online portal.

Utilise the features attached to your home loan 

Most variable rate home loans come with extra features - like a mortgage offset account or redraw facility, which can help pay off your loan faster. Making additional deposits via either of these features into your account will help reduce the total interest you pay as well as the term of the loan. This also reduces the balance owing on your home loan. For example, if your loan is $500,000 and you have $30,000 in your offset account or redraw facility, then interest is calculated on $470,000.

Refinancing your loan to a cheaper provider

If you currently have a mortgage you could find a lower interest rate and switch to another product. A lower interest rate on a new mortgage translates into lower monthly repayments, which reduces the length of your loan - and means you will pay off your loan in less time. Switching or refinancing, something you can do at any time if you are on a variable rate home loan, though you may have discharge fees associated with this. If you have a fixed rate home loan you can also switch but you are also likely to have to pay a ‘break’ fee. 

Yard’s low interest rate, fully-featured home loans - including offset accounts & redraw facilities - can be a great way to save money and reduce the term of their home loan.

Have any questions about repayments and home loans? We’re here to help, with a friendly local team available to chat at a time that suits you.

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