10 Ways to Reduce Mortgage Repayments

Before diving into strategies, it’s essential to understand what you’re paying for and what levers you can touch to reduce mortgage repayments.

What you pay: principal, interest, fees

• Principal: the original amount borrowed (or the outstanding balance). Every repayment contributes to reducing this to some extent.
• Interest: the cost of borrowing – usually expressed annually (e.g. 5% p.a.). The interest you pay depends on the interest rate, the amount of principal outstanding, and the duration.
• Fees (and other costs): include application fees, ongoing fees (e.g. mortgage-package fees, offset account fees), early repayment penalties (for breaking fixed-rate terms), redraw/offset fees, and possibly the lender’s mortgage insurance if the loan-to-value ratio (LVR) is high. These add to the cost and may limit flexibility.

Common questions

1. Can I reduce my repayments without refinancing?
   Yes — by changing payment frequency, making extra repayments, using offset/redraw, negotiating fees, etc.
2. What’s better: fixed or variable rate?
   • Fixed gives rate security, so payments predictable, but may come with penalties if you break the fixed term.
   • Variable allows more flexibility (extra repayments, offset, etc.), but repayments can increase if rates rise.
     The choice depends on your risk tolerance, how long you plan to stay in the home, and your cash flow stability.
3. How often do interest savings matter more?
   Especially in the early years of a long mortgage: most payments go toward interest rather than principal. Reducing interest payments early (via rate, extra payments, offset) has bigger payoff.
4. Will lowering my payments make me pay more overall?
   If you stretch the term, yes. Lower repayments over a longer period mean more interest total. So there’s a trade-off between monthly affordability and total cost.
5. Should I consult a professional?
   Absolutely. Lenders, brokers, financial advisors can model your situation (interest rates, fees, tax, cash flow) and recommend what saves most net of costs and risks.

Ten Ways to Reduce Mortgage Repayments

I divide strategies into three categories:

• Rate & Fee Strategies (lowering what you pay per dollar borrowed)
• Balance Strategies (reducing how much you owe)
• Duration Strategies (changing how long and how frequently you repay)

A. Rate & Fee Strategies

These target the interest rate and fees you are paying. Even small percentage-point differences can save thousands.

1. Refinance to a lower interest rate
   • Compare current home loans. As of mid-September 2025, borrowers can find refinance options with fixed rates around 4.64% p.a. (comparison rate ~5.5%) in some Australian lenders. (Money.com.au)
   • But watch for switching costs: discharge/exit fees from your current loan, application/setup fees in the new one, possible break costs if switching from a fixed-rate loan.
   • Example: someone with a $500,000 mortgage at 5.5% might be able to reduce rate to 4.6%, saving ~0.9pp. Over a 30-year loan, that could mean tens of thousands of dollars saved.
2. Negotiate rate with current lender / ask for match
   • If you find a better rate elsewhere, you might ask your existing lender to offer you a similar deal. Some lenders prefer to keep existing customers rather than lose them.
   • Also check if you qualify for lower rates (e.g. by reducing LVR, bundling services, switching to a mortgage package) which may reduce your interest margin.
3. Reduce or eliminate fees
   • Some loans have annual package fees, monthly offset fees, or other ongoing charges. These fees might offset the benefit of having a cheaper interest rate.
   • For example, offset accounts often come with higher fees or higher interest rates in the loan contract. If your offset balance is small, the interest saved may not outweigh the fees. (Westpac)
   • Be sure to check for early repayment adjustments (ERAs) or penalties if leaving fixed-rate loans early. For instance, CBA’s fixed-rate home loan fact sheet explains how ERA is calculated. (CommBank)
4. Use offset accounts / redraw features wisely
   • Offset account: money in it reduces the principal amount on which interest is calculated. It works like a transaction account linked to the home loan. (Macquarie Bank)
   • Example: If you have a $300,000 loan and $25,000 in an offset account, you only pay interest on $275,000. Over many years, that can significantly reduce interest cost. (Yourmortgage.com.au)
   • But check fees: some lenders charge for offset features; using redraw might have costs. Also, consider whether tying up savings in offset is better than investing elsewhere (after considering risk, tax).

B. Balance Strategies

These focus on reducing how much you owe, or reducing how much interest accrues, often via extra payments or debt restructuring.

1. Make extra repayments / lump sums
   • Any amount over the minimum repayment goes straight toward principal (in a principal & interest loan). That reduces future interest because interest is calculated on outstanding balance. (Moneysmart)
   • Examples: using tax returns, bonuses, inheritances to pay extra; rounding up payments; depositing spare cash into redraw or offset.
2. Debt consolidation
   • If you have high interest debts (credit cards, personal loans, etc.), consolidating into your mortgage (if possible) might make sense because home loan rates are generally lower than credit card/personal loan rates. However, this might extend interest payments over a longer period, and you lose flexibility or incurring risk (e.g. if billing debt with fewer protections than home loans). (NerdWallet UK)
   • Example: you have $20,000 credit card debt at 15% and a mortgage at 5%. If you are eligible to borrow more or top up, using your home loan (or a line of credit secured by your home) may reduce your interest burden. But ensure that this does not undermine your ability to manage cash flow or create risk on your home.
3. Reduce principal via accelerated or frequent payments
   • Change the frequency: go from monthly to fortnightly or weekly payments. Because there are 52 weeks or 26 fortnights in a year vs. 12 months, you often end up paying more total over time or having the loan balance reduced more often (interest is typically calculated daily). (Moneysmart)
   • Example: If monthly repayment is $2,000, paying $1,000 every fortnight ends up being 26 payments = $26,000 vs $24,000 via monthly — effectively 2 extra payments a year. Over long term savings are not trivial.
4. Combine savings and cash flow surplus into your loan
   • Any savings beyond what you need for buffer/emergency could be directed into the mortgage (offset/redraw/extras).
   • For example, regular contribution of salary before expenses into offset; using any windfalls (tax refund, bonus) to reduce mortgage principal rather than large purchases.
   • Use “mortgage calculators” to see what incremental effect small extra payments have on total time and interest saved. (NerdWallet UK)

C. Duration & Payment-Frequency Strategies

These change how long you repay and how often, which affect how quickly principal is reduced and how much interest accrues.

1. Shorten the loan term
   • If you can afford higher repayments, consider switching from a 30-year to a 25- or 20-year term. Shorter term means paying off sooner and paying less total interest.
   • But repayments will be higher. You need to check whether your cash flow can sustain this without compromising other financial goals.
2. Increase frequency of repayments / adopt accelerated schedules
   • Pay fortnightly or weekly rather than monthly. As noted, this reduces interest because balance falls more often. (Moneysmart)
   • Also, set up accelerated repayment schedules (e.g. paying as if interest rate were higher even if it's dropped) to get ahead. If rates drop, keep your repayments at the old level so extra goes toward principal. Athéna’s “fast-track” strategy is an example. (athena.com.au)

Real-World Examples & Trade-Offs

• Example 1: Offset account savings
  
  A borrower with $500,000 outstanding, 30-year term, interest rate 5% p.a., keeps $25,000 in offset. They could save about $73,000 in interest over life of loan, and cut about 7 years off repayment period. If instead they add regularly (e.g. $250/month) to offset, savings may be significantly larger. (Yourmortgage.com.au)
• Example 2: Moving from average rate to low rate + keeping old repayments
  
  At Athéna, moving from ~5.88% to their lowest variable rate, keeping repayment amount constant, can save ≈ AUD 28,000 in interest and reduce term by ~1 year 10 months. (athena.com.au)
• Example 3: Rate drops from RBA and what that means
  
  When the RBA cut the official cash rate by 0.25 pp, big banks reduced variable home loan rates. While lower rates mean smaller minimum repayments for borrowers, many choose to keep repayments the same to pay off principal faster. (ABC)

Ten Strategies Summarised

For clarity, here’s a table of the ten strategies with pros, cons, and conditions.

Strategy	Key Benefit	Potential Cost / Risk	Best For Whom
Refinance to lower rate	Lower interest payments, possibly lower monthly payments and less total interest	Fees, breaking fixed rates, closing costs, extra paperwork	Those with good credit, substantial loan balances, high current rates
Negotiate rate with current lender	Can avoid switching hassles, possible saving without big fees	Lender may refuse or offer marginal improvement	Existing customers with good repayment history
Reduce/eliminate fees	Lower monthly or annual costs, more of payment goes to interest/principal	Might lose features, cost to remove features	Borrowers with high-fee loans, or with low offset balances
Offset / redraw use	Reduces interest on outstanding balance, flexibility of using savings	Fees, temptation to withdraw, less liquidity if tied up in principal	Those with savings, good cash flow, not expecting emergencies soon
Extra repayments/lump sums	Cuts interest, reduces term	Must have spare cash; opportunity cost (other investments)	Those with irregular income or surplus, or who get bonuses/refunds
Debt consolidation	Reduces high-interest debts, simplifies payments	Extends period of interest; risk if using more borrowed funds	Ones with bad debts, high interest, stable income
Frequent payments	Balance reduces more often; interest savings	Must budget more carefully; possible transfer/processing costs	Paid fortnightly/weekly; disciplined budgeters
Use windfalls / savings into loan	Lifesaver of large one-off payments; reduces interest burden	Might reduce emergency liquidity; possible tax or investment trade-offs	People expecting bonuses, tax refunds, etc.
Shorten loan term	Much less interest paid overall; paid off sooner	Larger repayments; less flexibility; may stress budget	Those with solid income, able to sustain higher repayments
Accelerated schedule / keep repayments when rate drops	Use rate reductions to get ahead; reduces term without increasing payments drastically	Requires discipline; must resist lowering payments when rates fall	Borrowers committed to paying off early; low fluctuation in income

How to Choose Among Strategies & Combine Them

• Start by modelling your current mortgage: find out your current interest rate, outstanding principal, remaining term, fees, flexibility (extras, offset, redraw).
• Determine how much extra you can afford (monthly surplus, windfalls) without jeopardising emergency funds or other obligations.
• Use calculators (many banks, Moneysmart, comparison sites) to estimate savings from different strategies.
• Consider the stability of interest rates: if variable, there is risk they will go up; if fixed, risk of break penalties.
• Be realistic about liquidity: having savings accessible is important in case of job loss or emergency.

Ten Ways in Practice (Step-By-Step Suggestions)

Here’s a suggested path that many people could follow (not all, but a combination) to reduce repayments steadily:

1. Review current mortgage: obtain the loan statement; note interest rate (fixed or variable), fees, whether offset/redraw available, current term.
2. Check market for lower rate / refinance: use comparison sites; talk to brokers; ask your lender if they’ll match.
3. Make extra repayments: start small (e.g. extra $500/year or rounding up), ramp up when possible.
4. Set up an offset account (or use existing savings/redraw) to reduce interest. Deposit regular surplus or salary into it.
5. Change repayment frequency if not already weekly/fortnightly.
6. Shorten the loan term at refinance or via variation (if lender allows). For example, move from 30 → 25 year.
7. Consolidate high-interest debts into home loan or other cheaper facility (with caution).
8. When rates drop, keep repayments at old higher level so extra goes to principal.
9. Avoid paying only interest options; use principal & interest loans. Don’t stay interest-only longer than needed.
10. Negotiate or remove fees: some lenders have package fees or offset feature fees; sometimes you can switch to a loan with fewer fees, or get fees waived.

Key Trade-Offs & Risks

• Sacrificing flexibility / emergency buffer: putting all spare cash into repaying mortgage may leave you short in a crisis.
• Opportunity cost: sometimes investing extra funds elsewhere (superannuation, share market) might give higher return. You’ll have to compare after tax, risk.
• Fixed rate penalties: breaking fixed-rate mortgage for refinancing can incur Early Repayment Adjustments (ERAs) and administrative charges. Always obtain the quote. (CommBank)
• Behavioural issues: having an offset account requires discipline not to draw out the money; increasing repayments means tighter budget.

Which Strategies Under Each Category

To group them clearly:

• Rate & Fee Strategies:
  1. Refinance to lower rate
  2. Negotiate current lender rate / matching offers
  3. Reduce/eliminate fees
  4. Use offset / redraw features
• Balance Strategies:
  5. Extra repayments / lump sums
  6. Debt consolidation
  7. Using windfalls & savings into principal
• Duration & Payment Frequency Strategies:
  8. Increase payment frequency (weekly/fortnightly)
  9. Shorten loan term
  10. Keep repayments at older (higher) levels when rate drops / use accelerated schedule

Example Scenario: “Jane’s Mortgage”

• Loan: $500,000, Term 30 years, Rate 5.5% p.a., no offset, monthly payments.
• Annual repayment: roughly $34,000 (principal + interest). Over 30 years: total repayment ≈ $1,020,000 (this is an illustrative approximate).

Jane does the following:

• Finds new lender or renegotiates rate to 4.6% (saving ~0.9 pp).
• Opens an offset account and deposits $20,000 savings.
• Switches from monthly to fortnightly payments.
• Puts annual bonus of $5,000 into extra repayments.

Effect: She may reduce interest costs by tens of thousands over the life of loan, cut 5–8 years off the term, reduce monthly/fortnightly payments gradually, depending on rate falls, etc.

Consulting Professionals

• A certified mortgage broker can search the market, estimate switching costs, find low-rate loans.
• A financial adviser can help you weigh mortgage repayment against other uses of money (e.g. investing, paying off other debts, superannuation).
• Always request written estimates of switching/refinancing costs and expected interest savings.

Summary: What to Aim For & What Moves Make Most Difference

• Big levers: lowering interest rate, making extra payments early, using offset/redraw, shortening loan term.
• Smaller but cumulative: payment frequency, keeping payments up after rate drops, negotiating fees.
• Don’t ignore fees or penalties—sometimes a lower rate is offset by high switching or exit costs.

Conclusion

Reducing mortgage repayments in Australia is achievable via a mix of strategies: lowering what you pay per dollar borrowed (rates & fees); reducing your debt balance; and shortening or accelerating repayments. The best gains tend to come from combining several mild/medium steps (e.g. refinancing, offset usage, extra repayments) rather than one drastic move alone. Always model the savings, account for risk and costs, and consult professionals.

References

1. Moneysmart. Pay off your mortgage faster. (Australia) (Moneysmart)
2. IOOF. How to pay off your mortgage quicker. (ioof.com.au)
3. InfoChoice. Compare home loans with offset accounts. (InfoChoice.com.au)
4. YourMortgage. Home loans with offset accounts from 5.34%. (Yourmortgage.com.au)
5. Commonwealth Bank. Everyday Offset Account / Offset & Redraw feature. (CommBank)
6. Bankwest. Save money on your mortgage / Change frequency / Offset. (bankwest.com.au)
7. Canstar. Home loan comparisons / best rates. (Canstar)
8. Athena. Hacks to pay off your home loan faster. (athena.com.au)
9. Macquarie. Offset account details / Multiple offset accounts. (Macquarie Bank)
10. Commonwealth Bank. Fixed rate early repayment adjustment (ERA) fact sheet. (CommBank)