Increasing your repayments

Any money you pay on top of the minimum repayment amount goes straight towards paying off your principal (the money you borrowed). And the smaller your principal, the less interest costs you pay.

Take a look at the Scenario 1 example below. This example is based on a home loan of $400,000 at an interest rate of 4.00% p.a., for an initial term of 30 years. Increasing the repayments by $30 a week from the beginning of the loan would mean paying the loan off 3 years and 5 months earlier and reducing interest costs by around $37,727 over the life of the loan.—

In Scenario 2, we look at what happens when you increase repayments by $60 halfway through the loan term (i.e. 15 years). This reduces the loan term by 2 years 4 months, reducing interest costs by $14,429 over the life of the loan—.

As you can see, you'll pay less interest in Scenario 1, demonstrating that the earlier you increase your repayments (or make a lump sum payment), the less you'll pay in interest over the life of your home loan. Of course, if you can only afford to increase repayments later into the loan term, it can still make an impact.

Note: if you increase your repayments during a fixed rate period you may be charged Early Repayment Recovery.  Talk to us first so we can give you an indication of the Early Repayment Recovery we'll charge.

There are many ways you could increase your repayments. Here are some ideas that could help.

Regular repayments are set at an amount that will be affordable for you. Be realistic and factor in any expected lifestyle changes.

If you can comfortably afford to pay more than the minimum, you might like to consider increasing your regular repayments. If you do, you could pay your loan off faster and pay less interest over the life of your loan.  

If you pay monthly, consider whether you could pay half of what you are paying fortnightly instead. This means you’ll repay slightly more over the year as you will be paying the equivalent of one extra monthly repayment a year. For example, if your monthly repayments are $2,400, consider whether you could pay $1,200 a fortnight instead. Based on a loan of $400,000 at an interest rate of 4.00% p.a. for an initial term of 30 years, this would reduce your total interest cost by around $23,000 and you’d pay your home loan off 2 years earlier!—

If you’ve chosen a set loan term, the required repayments are often not round numbers. You could round them up to the nearest $10 or even $100 to pay a bit more with each repayment. For example, if your minimum fortnightly repayments are $877.67, consider whether you could pay $900 instead. Based on a loan of $400,000 at an interest rate of 4.00% p.a. for an initial term of 30 years, this would reduce your total interest cost by around $15,000 and you’d pay your home loan off 1 year and 4 months earlier!—

Keep your repayment amount the same if interest rates fall.