Repay Home Loan Early? Here's How to Save Big (2026)

For many Australians, the desire to repay their home loan early is more than just a financial goal; it's a dream of financial freedom. Whether you're looking to save on interest, gain peace of mind, or simply own your home sooner, understanding the ins and outs of early mortgage repayment is crucial. Let's explore the possibilities and strategies available to you in 2026.

Understanding Early Home Loan Repayment

Repaying your home loan early can significantly reduce the total interest paid over the life of the loan. Essentially, this means making extra repayments on top of your regular monthly payments. However, it's essential to understand both the benefits and potential pitfalls associated with this financial strategy.

The primary benefit is interest savings. By reducing the principal balance of your loan sooner, you decrease the amount of interest charged. Additionally, achieving homeownership sooner can relieve financial stress and provide more flexibility for your future financial plans.

Current Interest Rates and Requirements

In 2026, the Australian home loan market is diverse, with interest rates ranging from 6.49% to 12%, depending on your lender and financial situation. Understanding these rates and how they apply to your mortgage is key to planning early repayments.

Most lenders offer variable and fixed-rate loans, each with different implications for early repayment. Variable loans often allow more flexibility for additional payments, while fixed-rate loans might impose fees or restrictions.

Here is a comparison of common loan types and their early repayment rules:

Steps to Repay Your Home Loan Early

Repaying your home loan early can be a straightforward process if you follow these steps:

1. Review Your Loan Agreement: Understand the terms regarding extra repayments and any associated fees.
2. Check for Fees: Identify any early repayment fees, especially if you have a fixed-rate loan.
3. Budget for Extra Repayments: Determine how much extra you can afford to pay each month. Even a small increase can make a significant difference over time.
4. Contact Your Lender: Discuss your intention to make additional payments and confirm any changes to your loan terms.
5. Automate Extra Payments: Set up automatic transfers to ensure consistent extra repayments.
6. Monitor Your Progress: Regularly review your loan statements to track your progress towards early repayment.

Expert Tips and Considerations

Before diving into extra repayments, consider these expert tips to maximise your benefits:

• Offset Accounts: Utilise an offset account to reduce the interest charged on your loan without committing to permanent extra repayments.
• Loan Redraw Facility: If available, use a redraw facility to access extra repayments in case of emergencies.
• Consider Refinancing: If your current loan terms are restrictive, refinancing through a broker like Esteb and Co, with access to 83+ lenders, could offer more favourable terms.
• Maintain Emergency Savings: Ensure you have a savings buffer before directing all extra funds to your loan.
• Evaluate Investment Opportunities: Sometimes, investing extra funds elsewhere might yield better returns than reducing low-interest debt.

Frequently Asked Questions

• Can I repay my fixed-rate loan early? Yes, but be aware of potential break costs. Consult your lender for specific terms.
• How much can I save by repaying early? Savings depend on your loan size, interest rate, and additional payment amount. Use a loan calculator for a personalised estimate.
• Will extra repayments affect my credit score? No, making additional payments does not negatively impact your credit score.
• Is it better to make extra monthly payments or a lump sum? Both options can reduce your loan term and interest. Choose based on your financial flexibility and loan terms.
• What if my lender doesn't allow extra payments? Consider refinancing to a more flexible loan product.
• Can I access extra payments if needed? Only if your loan has a redraw facility. Confirm this with your lender.
• Does early repayment change my monthly instalments? Typically, extra payments reduce the loan term, not the monthly instalment, unless you refinance.

Repaying your home loan early requires careful planning and consideration. By understanding your options and consulting with a diverse lender panel like Esteb and Co's, you can navigate this process effectively and achieve your financial goals sooner.