Extra Mortgage Repayments: How Much You Save
How an extra $200 a month on a $600,000 mortgage saves around $100,000 in interest and years of repayments — and when an offset beats extra repayments.
On a typical $600,000 mortgage, an extra $200 a month from day one can save somewhere around $100,000 in interest and shave roughly four years off the term.
There's no loophole and no product to buy — just the amortisation maths (the schedule that decides how your loan gets paid off) working for you instead of against you. Here's why it works, and why 'when' matters more than 'how much'.
Every extra dollar skips the queue
Your normal repayment has to feed the interest first — on a fresh $600,000 loan at around 6%, roughly $3,000 of the first month's payment vanishes into interest before the loan shrinks at all.
An extra repayment skips that queue. The required interest is already covered, so every extra dollar lands directly on the principal — the actual loan. A smaller principal means less interest next month, which means more of your regular payment hits the principal too.
Compounding in reverse
A mortgage is compounding pointed at you: interest charged on a big balance keeps the balance big, which keeps the interest big.
Extra repayments run it in reverse. The saving from a single extra payment isn't just that payment — it's the payment plus every bit of interest it would have generated, compounding over decades. That's how $200 a month becomes $100,000.
💡Quick win
An extra dollar doesn't save you a dollar — it saves a dollar plus all the interest that dollar would have attracted for the rest of the loan. The earlier it lands, the longer it compounds in your favour.
Why year 3 beats year 23
An extra payment in year three has 27 years of interest to cancel. The same payment in year 23 has seven. Early extras do the heavy lifting because they have the most runway.
That's cheerful news if you've just bought: the years when money feels tightest are exactly when small extras punch hardest. Rounding up the repayment or banking half a pay rise beats a heroic lump sum a decade from now.
- Early extras cancel decades of future interest; late extras cancel a little
- Consistency beats heroics — small and automatic wins
- Round up your repayment so the extra happens without willpower
- A one-off windfall (tax refund, bonus) early on punches far above its size
Extra repayments vs offset: the flexibility catch
Interest-wise, $10,000 paid extra onto the loan and $10,000 parked in an offset account (an everyday account linked to your loan, where every dollar cancels a dollar of interest-attracting balance) do exactly the same job. The difference is getting the money back.
Offset money is simply yours — spend it tonight. Extra repayments sit inside the loan, and getting them back means redraw, where the bank sets the rules, can charge fees, and can change the deal. Fixed loans often cap extra repayments entirely, with break fees if you blow past the cap.
⚠️The trap
Money paid onto the loan is only retrievable on the bank's terms. If you might need the cash back — emergency fund, renovation, life — an offset gives identical interest savings with none of the permission-asking.
The plan, in one paragraph
Start now, start small, make it automatic: round the repayment up to a tidy number, or set a standing extra transfer the day after payday. If flexibility matters, park extras in an offset instead — same saving, easier exit.
Then run your own loan through a repayment calculator with your chosen extra amount and look at the interest saved. Watching four-ish years and six figures disappear from a real schedule is better motivation than any budgeting app.
FAQ
How much do extra repayments actually save?
It scales with the loan and the rate, but as a guide: around $200 extra a month on a $600,000 loan at roughly 6% saves in the region of $100,000 in interest and cuts about four years off a 30-year term. Bigger extras, bigger savings.
Is it better to make extra repayments or use an offset account?
The interest saving is identical. The difference is access: offset money is yours to spend any time, while extra repayments sit in the loan and come back via redraw on the bank's terms. If you might need the cash, offset usually wins.
Can I make extra repayments on a fixed-rate loan?
Often only up to a yearly cap set by the lender, and going over it can trigger fees. Variable loans typically allow unlimited extras. If smashing the loan is your plan, check the cap before you fix.
Run your own numbers
Sources: figures checked against ATO published rates and thresholds for FY2025-26 at the review date. See how we check our numbers.
⚠️ General information only — not tax or financial advice. Figures relate to FY2025-26 unless stated otherwise.