Extra Repayments: How $200/Month Saves $100K+

On a $500,000 mortgage at 6% over 30 years, your minimum monthly repayment is $2,998. Pay just $200 extra per month and you save approximately $114,000 in interest and pay off your loan 5 years and 3 months early. That's $200/month turning into $114,000 of savings.

The maths works because of compound interest working in reverse. Every extra dollar you pay reduces your principal balance, which reduces the interest charged next month, which means more of your next payment goes to principal. The effect snowballs over time.

At $500/month extra, the savings jump to approximately $195,000 in interest and you're done 9 years early. At $1,000/month, you save $284,000 and finish in just 17 years instead of 30.

Here's a trick that costs you almost nothing extra but saves thousands: switch from monthly to fortnightly repayments by paying half your monthly amount every two weeks. Since there are 26 fortnights in a year, you end up making 13 monthly payments instead of 12.

On a $500,000 mortgage at 6%, this saves approximately $66,000 in interest and takes 4 years off your loan — without feeling the pinch. Your cash flow barely changes because you're paying roughly the same per fortnight, but you're making one extra monthly payment per year.

Most lenders allow this switch at no cost. Just call and ask to change your repayment frequency.

Variable rate loans generally allow unlimited extra repayments with full redraw access. This is the most flexible option for anyone planning to pay ahead.

Fixed rate loans are more restrictive. Most fixed loans cap extra repayments at $10,000-$30,000 per year. Exceed this and you'll face break costs — which can be thousands of dollars. Always check your loan contract for the exact cap.

If you're on a fixed rate and want to pay more, consider a split loan: fix a portion for rate certainty and keep the rest variable for extra repayment flexibility.

Extra repayments give you a guaranteed, tax-free return equal to your mortgage interest rate. If your rate is 6%, paying $100 extra is equivalent to earning 6% after tax with zero risk. To match that in the share market, you'd need roughly 8-9% pre-tax returns (depending on your marginal rate).

The argument for investing: historically, Australian shares have returned 8-10% nominal over the long term, which beats most mortgage rates. But that's an average — individual years can be negative, and you're taking on risk.

Many people do both. A common approach: make extra repayments up to the redraw facility limit for security, and invest anything above that for growth. The peace of mind of a smaller mortgage has real value that doesn't show up in a spreadsheet.

Here's what $200/month extra saves across different loan sizes at 6% over 30 years:

$300,000 loan: Save $68,000 in interest, pay off 5 years 8 months early.

$400,000 loan: Save $91,000 in interest, pay off 5 years 5 months early.

$500,000 loan: Save $114,000 in interest, pay off 5 years 3 months early.

$700,000 loan: Save $137,000 in interest, pay off 4 years 6 months early.

$1,000,000 loan: Save $158,000 in interest, pay off 3 years 10 months early.

Notice the diminishing returns at larger loan sizes — $200 extra is a smaller percentage of the minimum payment, so the proportional impact is less. But the absolute savings still grow.