Mortgage Reduction Strategies

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Ways to reduce your mortgage

Start with your outstanding balance, interest rate, remaining loan term and household budget. Consider how each strategy affects both total borrowing costs and the money you need for everyday expenses.

• Make extra repayments: Paying more than the required amount can reduce the balance sooner and lower total interest. Check repayment limits and any charges, particularly on fixed-rate loans.
• Review offset and redraw features: An offset account can reduce the balance used to calculate interest, while redraw may let you access extra repayments. Fees, access conditions and the amount offset vary between products.
• Check repayment frequency: Paying half your monthly repayment every fortnight results in more paid over a year than making twelve monthly repayments. Simply changing payment frequency without increasing the annual amount is not the same strategy.
• Review your rate and refinancing costs: Compare published interest rates, fees and loan conditions. Allow for switching costs and any fixed-rate break costs, and compare loans over the same remaining term.

Lower repayments are not always lower costs

Extending the loan term may reduce regular repayments but increase total interest. Similarly, consolidating other debts into a mortgage can spread repayments over a longer period and put your home at risk if repayments cannot be met. Look beyond the monthly payment to the total amount repayable.

Build a sustainable repayment plan

Choose an extra repayment amount that fits your budget while keeping money available for unexpected expenses. Review the plan when your income, expenses or interest rate changes.

Reducing mortgage debt is different from borrowing against home equity to invest. Investment values and returns can fall while the loan still needs to be repaid. Seek appropriate financial and tax advice before combining mortgage reduction with a property investment or other borrowing-to-invest strategy.

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Please note that some of our calculators may use assumptions that are not necessarily applicable to your current specific circumstances and we therefore cannot always guarantee their accuracy.

We recommend that you seek professional financial advice from a licensed professional before proceeding with a loan.

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