Make 3 extra mortgage payments a year
Discover the simple strategy of making 3 extra mortgage payments a year to significantly cut down your interest and loan term in Australia.
Make 3 Extra Mortgage Payments a Year – Save Big on Interest
Learn how making just 3 extra mortgage payments a year can cut years off your loan and save thousands in interest.
MORTGAGE YEARS
Maximising your mortgage repayments strategy
Switching from monthly repayments to weekly or fortnightly can significantly reduce your loan term and interest cost. By dividing your monthly repayment into weekly or fortnightly amounts, you effectively make the equivalent of 13 months of payments per year instead of 12. Why this works:
Interest is calculated daily, so more frequent repayments reduce the balance sooner.
The extra “13th payment” goes directly to principal, cutting down long-term interest.
Smaller, regular payments align with most pay cycles, making budgeting easier.
Before changing repayment frequency, confirm your lender correctly applies extra payments to the principal without penalties. A HeyNest broker can review your loan terms and ensure this strategy works effectively for your situation.
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Benefits of making extra mortgage payments
Increasing repayment frequency or making additional payments leverages compound interest in your favour, reducing both cost and repayment time. Core benefits:
Major interest savings: Even one extra repayment per year can save tens of thousands over 30 years.
Faster equity building: Extra payments reduce principal, boosting ownership value quickly.
Greater financial security: Accelerated repayment provides protection against rate rises and long-term debt stress.
To maximise results, your loan must allow penalty-free extra repayments. A broker through HeyNest can confirm this or help you move to a more flexible product.
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Steps to implement extra mortgage payments
To ensure extra payments have the intended impact, you must set them up correctly and verify how they are applied by your lender. How to do it:
Review your loan terms for any restrictions or fees on extra repayments.
Switch to fortnightly or weekly payments, ensuring the amount equals half (or a quarter) of the monthly repayment.
Automate repayments to maintain consistent extra contributions.
Use lump sums from bonuses or tax returns for additional principal reduction.
If you need help structuring or negotiating a flexible loan to support this strategy, HeyNest can connect you with an independent broker who will optimise your repayment plan and product choice.
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Frequently asked questions
Is it better to pay fortnightly or weekly to save interest?
Fortnightly is generally the simplest and most effective way to achieve the 13-payment-per-year goal in Australia, as the calculation is based on half the monthly payment.
Can I make extra payments on a fixed-rate mortgage?
Yes, but often with an annual limit (e.g., $10,000 to $25,000). Always check your specific fixed-rate contract to avoid hefty break costs.
Will making extra payments reduce my minimum future payment?
No, the minimum monthly payment remains the same, but you will pay off the loan faster. Some lenders may offer a 'redraw' facility if needed.
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