Extra Repayments Calculator
See how additional payments reduce your loan balance faster, save interest, and cut years off your mortgage.
How Extra Mortgage Repayments Save You Money
How it works
Every dollar of extra repayment goes directly to reducing your loan principal. Because mortgage interest in Australia is calculated daily on the outstanding balance, lowering that balance even slightly means less interest accrues the very next day — and every day after. The compounding effect is significant: a modest $200/month extra on a 30-year loan can cut 4–5 years off the term and save tens of thousands in interest.
There are three common approaches. Regular extra payments (e.g. an extra $100–$500 per month on top of minimum repayments) are the most effective because they compound over decades. Lump-sum payments — such as depositing a tax refund, bonus, or inheritance — deliver the biggest impact when made early in the loan, while interest makes up the largest share of each payment. Fortnightly repayments (paying half the monthly amount every two weeks) result in 26 half-payments per year instead of 12 full payments — effectively sneaking in one extra monthly payment annually.
One important caveat for fixed-rate loans: most Australian lenders cap extra repayments at $10,000–$30,000 per year during the fixed term. Exceeding the cap triggers break costs, which can be substantial. Variable-rate loans generally have no limit on extra repayments, making them more flexible for borrowers who want to pay down debt aggressively.
When to use this calculator
- You want to see how a specific extra monthly or fortnightly amount affects your total interest and loan term
- You've received a lump sum (tax refund, inheritance, bonus) and want to compare applying it to your mortgage versus investing elsewhere
- You're choosing between paying extra on a variable loan versus saving into an offset account
- You want to calculate whether making extra repayments on a fixed-rate loan will stay within your lender's annual cap
- You're considering switching to fortnightly repayments and want to see the time and interest saved
Key concepts
- Principal vs interest split
- In the early years of a 30-year loan, roughly 60–70% of each repayment is interest and only 30–40% reduces the principal. Extra repayments bypass this split entirely — 100% of any extra payment reduces the principal directly, which is why they have such a large compound effect.
- Fixed-rate extra repayment caps
- Most Australian lenders allow $10,000–$30,000 in extra repayments per year on fixed-rate loans without penalty. Exceeding this triggers break costs calculated based on the difference between your fixed rate and the current wholesale rate for the remaining fixed term. Always check your loan contract before making large lump-sum payments on a fixed loan.
- Redraw facility
- When you make extra repayments, the surplus typically goes into a redraw facility — a pool of funds you can withdraw later. Unlike an offset account, redraw funds are technically held by the lender, and some products restrict minimum redraw amounts or charge fees. For investment loans, redrawing can also affect the tax deductibility of interest.
- Opportunity cost
- The interest rate on your mortgage is the guaranteed, after-tax return on extra repayments. At 6.2% on a variable loan with a 37% marginal tax rate, extra repayments deliver a risk-free 9.8% pre-tax equivalent return. Compare this to expected after-tax returns on alternatives like savings accounts, shares, or super contributions.
Worked example — $300/month extra on a $550,000 loan
James and Lisa have a $550,000 variable-rate mortgage at 6.40% over 30 years. Their minimum monthly repayment is $3,437. They decide to pay an extra $300/month from day one.
| Minimum repayments | With $300/month extra | |
|---|---|---|
| Monthly payment | $3,437 | $3,737 |
| Total interest paid | $687,440 | $546,129 |
| Interest saved | — | $141,311 |
| Loan term | 30 years | 24 years 9 months |
| Time saved | — | 5 years 3 months |
That $300/month — roughly $10 per day — saves them $141,311 in interest and frees them from the mortgage more than 5 years early.
If they also receive a $15,000 tax refund in year 3 and apply it as a lump sum, the total interest saved rises to approximately $172,000 and the loan term drops by another 8 months. The earlier a lump sum is applied, the greater its impact due to compounding.
Extra Repayments FAQ
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