Paying off your mortgage early: strategies compared with figures

The way to pay off a mortgage early is to pay more than the minimum, as early as you can. Every extra dollar reduces the balance that interest is charged on for the rest of the loan. On a $500,000 loan at 5.06% over 30 years (the average advertised one-year fixed rate, as at 10 November 2026), simply paying half the monthly repayment every fortnight clears the loan in about 25 years 2 months and saves $87,852 of interest. Adding $250 a month saves $94,344; a $10,000 lump sum every year saves $203,945. During a fixed rate, banks cap how much extra you can pay without a break fee, so the right method depends partly on your loan type.

Why paying early saves so much

Interest is charged on what you owe. Early in a table loan, most of each repayment is interest: on our example loan, the first monthly repayment of $2,702.48 is $2,108.33 interest and only $594.15 principal. Any extra you pay goes entirely to principal, and that lower balance then attracts less interest every month until the loan ends. The earlier the extra, the longer it keeps saving.

That is why the same total extra can have very different effects. Paying $100 a month from the start saves $43,403 over the life of our example loan. Paying the same $1,200 as a single lump sum at the end of each year saves a little less, $41,745, because each dollar arrives up to a year later.

All the figures in this guide assume the rate stays at 5.06% for 30 years. It will not, but the comparisons between strategies hold up at other rates. Use our extra repayments calculator to test your own loan.

Strategies compared

Base case: $500,000 at 5.06% over 30 years, monthly repayments of $2,702.48, total interest $472,887.

“Paid off sooner” is measured against the 30-year term; the fortnightly and weekly strategies finish in about 25 years 2 months, and the combined strategy in 16 years 6 months.

Fortnightly halves: the painless option

Paying half your monthly repayment every fortnight works because there are 26 fortnights in a year, so you make 13 monthly repayments’ worth instead of 12. ANZ explains it the same way: “you’ll repay slightly more over the year as you will be paying the equivalent of one extra monthly repayment a year.”

The trap is that this is not what a bank sets up when you simply choose fortnightly repayments. A true fortnightly repayment on our example loan is $1,246.70, worked out as its own 30-year loan, and it saves almost nothing against monthly. You need to ask for, or set, $1,351.24: half the monthly figure. Our guides to fortnightly vs monthly repayments and weekly repayments explain the difference in full.

The extra here is $104.54 a fortnight, about $2,718 a year, which suits people paid fortnightly because it lines up with payday.

Regular extras and lump sums

Regular extras work best for steady incomes. Even small amounts add up over decades, and an automatic payment means you do not have to think about it. Our extra repayments guide has more examples.

Lump sums suit bonuses, tax refunds, inheritances or the proceeds of selling something. Two choices matter:

• Keep the repayment the same and finish sooner. A $25,000 lump sum after the first year (5% of the loan) saves $75,116 and takes 3 years 1 month off.
• Lower the repayment and keep the end date. The same $25,000 drops the repayment to $2,565.35 a month but saves only $22,717, because the balance falls no faster afterwards.

We could not confirm each bank’s default after a lump sum, so tell your bank which you want. Our guide to lump sum repayments goes into the detail.

A shorter term forces the higher repayment, which helps if you would otherwise not keep it up, but removes the option of dropping back in a tight month. Our mortgage term length guide compares 25 and 30 years in detail.

Fixed-rate limits on paying extra

On a floating loan you can pay extra whenever you like: ANZ says “On a floating ANZ Home Loan you can make extra repayments whenever you like.” On a fixed rate, paying too much extra can trigger a break fee. Each bank allows some extra without one (pages accessed 10 November 2026):

On a $500,000 loan, 5% is $25,000 a year, so every strategy in our table stays within a 5% limit in the early years. The largest, half-monthly fortnightly plus $10,000 a year, pays about $12,702 a year more than the monthly repayments. If you want to pay more, the usual approach is to put part of the loan on floating or revolving credit. See split loans.

Which strategy should come first?

The strategies are not either-or, and the order you add them in matters less than starting. A sensible sequence for many households looks like this:

1. Switch to half the monthly repayment each fortnight (or a quarter each week). It is the least noticeable change and, on our example, saves $87,852.
2. Round up. Add a regular extra you will not miss, even $50 a week. Set it as an automatic payment so it happens without a decision each time.
3. Direct windfalls to the loan. Bonuses, tax refunds and pay rises are easier to commit before you get used to spending them.
4. At each refix, keep the repayment the same if the rate falls. If your new rate is lower, ask your bank to keep your current repayment rather than reduce it; the difference becomes an automatic extra.
5. Review the term. If your income has grown, shortening the term locks in the higher repayment.

On a true weekly loan of $623.22, an extra $50 a week saves $84,372 and finishes 4 years 8 months sooner, on our example’s assumptions.

Offset and revolving credit

Two loan types let your savings work against the mortgage without locking the money away:

• Offset mortgages charge interest on the loan less the money in linked accounts. With the repayment kept the same, a steady linked balance shortens the loan.
• Revolving credit puts your pay straight into the loan, reducing the balance until you spend it.

Both are floating, so their rates are usually higher than fixed specials (6.31% average floating against 5.06% one-year fixed, as at 10 November 2026). They pay off when you keep meaningful balances in them, and on part of the loan rather than all of it.

Whatever you choose, keep an emergency buffer. Money paid into a table loan is hard to get back out without asking the bank. Paying the mortgage down fast is rarely worth leaving yourself with nothing to fall back on.

This is general information, not financial advice. Rates as at 10 November 2026.

Questions people ask

What is the fastest way to pay off a mortgage?

Paying as much extra as you can, as early as you can. On $500,000 at 5.06%, combining half-monthly fortnightly repayments with a $10,000 lump sum each year clears the loan in about 16 years 6 months and saves $232,646, if the rate stayed the same.

Does paying fortnightly really save money?

Only if you pay half the monthly repayment each fortnight. That makes 13 monthly repayments a year and saves $87,852 on our example loan. A true fortnightly repayment, worked out as its own loan, saves almost nothing.

Is it better to make extra repayments or a lump sum?

Earlier is better. $100 a month from the start saves $43,403 on our example; $1,200 paid once at the end of each year saves $41,745. Use whatever fits your income.

Can I pay extra on a fixed-rate mortgage?

Yes, within your bank’s allowance. ANZ allows up to $250 a week more plus a 5% lump sum a year; BNZ and Kiwibank allow about 5% a year. Paying more than that may bring a break fee.