For many Australian homeowners, deciding whether to save or pay down your home loan has become a major financial consideration. With interest rates remaining stubbornly high and cost-of-living pressures continuing, a growing number of borrowers are prioritising strategies that help reduce their mortgage sooner. In fact, recent research shows that more Australians than ever are now focused on getting ahead financially by shrinking the size of their home loan.
A survey conducted by Agile Market Intelligence revealed that 69% of homeowners—the highest figure reported this year have made it their top priority to pay extra off their home loan. But why is this happening now, and what are the real benefits of doing so? Below, we break down the key reasons Australians are choosing this path and explore practical strategies you can use to make faster progress on your own mortgage.
Why Paying Down Your Home Loan Makes More Sense
Higher interest rates make mortgage reduction more valuable
One of the biggest motivators for homeowners choosing to pay down your home loan is the simple reality of interest rates. The interest you pay on a mortgage is usually much higher than the interest you earn in a regular savings account. That means every extra dollar placed into your home loan works harder and delivers greater long-term savings.
Banks make a significant portion of their revenue through lending, so it’s expected that mortgage rates typically outweigh savings rates. By reducing your loan balance sooner, you effectively cut the amount of interest charged each month—saving you potentially thousands of dollars over the life of the loan.
Even better, when you start paying down your mortgage ahead of schedule, the savings compound. Here’s how:
- Every extra payment directly reduces your principal balance.
- This lowers the interest charged for the next month.
- Because your minimum repayment stays the same, more of it goes directly to reducing the principal.
This creates a powerful snowball effect—your loan shrinks faster and the interest you pay each month continues to decline.
Increasing Your Home Equity Gives You More Options
When you work to pay down your home loan, you naturally increase the equity you hold in your property. Equity is the difference between your home’s current market value and the amount you owe on the mortgage. The more equity you have, the stronger your financial position becomes.
Greater equity can open the door to:
- Refinancing to a lower rate: Borrowers with stronger equity often secure more competitive home loan deals.
- Property investment opportunities: Your equity may be used as a deposit on an investment property.
- Financial security: More equity often means more flexibility during unexpected life events or economic downturns.
Unless the property market shifts downward, reducing your loan balance is one of the most reliable ways to build equity.
How to Pay Down Your Home Loan Sooner – Even With Higher Living Costs
Many Australian homeowners feel the squeeze of rising expenses, but paying down your mortgage faster doesn’t always require large lump sums. Even small, consistent actions can deliver meaningful long-term results. Here are practical strategies that work regardless of your budget.
1. Switch to fortnightly payments
One of the simplest ways to accelerate your mortgage reduction is to pay fortnightly instead of monthly. When you split your monthly repayment in half and pay that amount every two weeks, you effectively make 13 full monthly payments per year instead of 12.
This extra month’s payment may not feel like much on a fortnightly basis, but it can significantly chip away at your loan over time. It also aligns well with most pay cycles, helping improve cash flow consistency.
Need help restructuring your repayments or understanding the impact of fortnightly payments?
Contact us and we’ll walk you through the numbers to see how much you could save.
2. Add lump-sum contributions when possible
If you receive occasional windfalls, such as:
- A tax refund
- An annual bonus
- An inheritance
- Investment dividends
…depositing these straight into your mortgage can dramatically accelerate your progress. Because these are funds you didn’t rely on for day-to-day expenses, many people find this method painless yet highly effective.
Even small lump sums can make a meaningful difference when combined with regular repayments.
3. Use an offset account to reduce interest
Offset accounts are one of the most popular tools Australians use to pay down your home loan indirectly. Here’s how they work:
- Your offset account is linked to your mortgage.
- The balance in the offset account is subtracted from your loan amount before interest is calculated.
- This reduces your interest charge each month.
For example:
If you owe $500,000 and have $30,000 sitting in an offset account, you only get charged interest on $470,000.
This means more of every repayment hits your principal, allowing your loan to reduce faster.
Not every borrower needs an offset account, but for many it can be an excellent strategy.
4. Review your interest rate regularly
Regardless of your efforts to pay down your home loan, your savings could be undermined if you’re paying a higher interest rate than necessary. The Reserve Bank reports that the average variable home loan rate sits around 5.5%, yet many lenders offer more competitive options.
Unfortunately, many borrowers assume their bank automatically gives them the best rate but this is rarely the case.
Home loan rates vary widely across lenders, and loyalty is almost never rewarded in the mortgage industry. Regular reviews—ideally every 12 months can help ensure you’re not overpaying.
You could potentially save thousands each year by refinancing to a lower rate.
Book your free home loan review today and we’ll compare your rate, negotiate on your behalf, and show you exactly how much you could save.
Why Paying Down Your Home Loan Faster Truly Matters
Most home loans are designed to span 25 to 30 years. But with the right strategies, you don’t need to wait decades to become mortgage-free. Paying your loan off earlier can:
- Reduce stress and improve financial peace of mind
- Free up thousands (or tens of thousands) in interest
- Increase your borrowing power
- Strengthen your long-term wealth position
- Give you greater lifestyle freedom
Imagine what you could do once your mortgage is no longer your biggest monthly expense. That’s the outcome more and more Australian households are aiming for.
Take Control of Your Mortgage
Choosing to pay down your home loan is one of the most effective ways to build wealth and improve your financial stability. Whether you’re making small extra repayments, reviewing your interest rate, or using tools like offset accounts, every step counts.
If paying down your home loan is a key goal for you this year, we’re here to help. Our expert team can review your existing loan, compare lenders, and help you find smart strategies that fit your lifestyle and financial goals.
Ready to Get Ahead on Your Home Loan?
Let’s create a personalised plan to help you pay down your home loan sooner.
Book your free consultation today.
Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Connect with Louisa on Linkedin.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.