Key takeaways
- A lower interest rate cuts your repayments and your total interest at the same time. Ask your lender first, then compare the market.
- Refinancing can save hundreds a month, but check break costs, fees, LMI and the new loan term before you switch.
- Extending your loan term lowers repayments but can add a large amount of interest over the life of the loan.
- Offsets, extra repayments and fortnightly payments cut interest and time, but usually don’t lower the required repayment.
- If you’re struggling, ask your lender for a hardship variation early. It must reply in writing within 21 days.
There are eight practical ways to reduce your home loan repayments, and they don’t all work the same way. Some lower the amount you have to pay each month. Others cut the interest you pay and the years left on your loan. A few lower your repayments today but cost more over time. Here’s how each one works, with hypothetical examples, so you can pick the right mix.
8 ways to reduce your home loan repayments at a glance
Start with your latest loan statement. You need your balance, interest rate, years left, whether the rate is fixed or variable, and any fees. With those five numbers you can compare offers properly and see which of the options below will make a real difference.
| Option | Lowers the monthly repayment? | Cuts total interest? | Watch for |
|---|---|---|---|
| 1. Rate review with your lender | Yes | Yes | Nothing, if the lender agrees |
| 2. Refinance to a lower rate | Yes | Yes | Fees, break costs, LMI, loan term |
| 3. Extend the loan term | Yes | No, it adds interest | Much more interest over time |
| 4. Offset account | Usually not | Yes | Fees and rate loading |
| 5. Extra or lump sum repayments | Only if the lender recalculates | Yes | Limits on fixed loans |
| 6. Fortnightly repayments | No | Yes | Must be half the monthly amount |
| 7. Interest-only period | Yes, for a while | No, it adds interest | Repayment jump later |
| 8. Hardship variation | Yes, temporarily | Usually not | Only if you’re in genuine hardship |
1. Ask your lender for a better rate
Moneysmart says there can be a difference of more than 2% between variable home loan rates on the market. After three cash rate rises in 2026, it’s worth checking that your rate is still competitive. Find what other lenders offer for a similar loan, then ask your lender to match it. Having at least 20% equity and a good credit history strengthens your hand.
Keep the request simple: tell the lender the rate you’ve been offered elsewhere, how long you’ve been a customer, and that you’d prefer to stay. If it agrees, check the new rate on your next statement. A broker can do this comparison for you and tell you whether the lender’s counter-offer is competitive.
2. Refinance to a lower rate
If your lender won’t move, switching may be worth it. Before you do, add up the costs: discharge and application fees, break costs if you’re on a fixed rate, and lenders mortgage insurance if your equity is under 20%.
Hypothetical example
You owe $650,000 with 25 years left at 6.60%, so repayments are about $4,430 a month. Refinancing to 6.10% over the same 25 years brings them down to about $4,228, a saving of about $202 a month, or $2,420 a year.
Keep the new loan term close to the years you have left, or the saving is partly an illusion (see option 3). Our complete guide to refinancing covers the steps, and our refinancing page explains how we compare lenders for you.
Could you be on a better rate?
Send Phillip your latest loan statement and he’ll tell you what the market offers and whether switching is worth the cost.
3. Extend your loan term, carefully
Stretching the loan over more years lowers each repayment. On the same $650,000 at 6.60%, resetting the term from 25 to 30 years cuts repayments by about $278 a month. The cost: about $165,600 more interest over the life of the loan, if you only make the minimum repayments. Use it to get through a tight patch, then pay extra again when you can.
4 to 6. Offset, extra repayments and fortnightly payments
These three cut interest and time rather than the required repayment, but they can free up money later.
- Offset account. Keeping $30,000 in an offset against the same loan would save about $112,600 in interest and repay it about two years sooner. See whether an offset account is worth it.
- Extra or lump sum repayments. Paying $20,000 off the loan and asking the lender to recalculate the minimum repayment over the remaining 25 years would lower it by about $136 a month. Not every lender recalculates, and fixed loans may cap extra repayments.
- Fortnightly repayments. Paying half the monthly amount every fortnight means 26 half-payments, or 13 monthly repayments, a year. On our example that repays the loan about four years sooner and saves roughly $135,000 in interest.
All figures are hypothetical and approximate; lenders calculate interest daily. Test your own numbers with our home loan repayments calculator.
7. Consider a short interest-only period
Switching to interest-only lowers repayments for a set time, because you pay nothing off the balance. It costs more interest overall, and repayments rise when the period ends. APRA expects banks to approve interest-only loans for owner-occupiers only where there’s a sound, documented reason, not because you can’t afford principal and interest. Moneysmart’s advice is to avoid it if you can. It makes more sense for investors; our blog on interest-only investment loans explains why.
8. If you’re struggling, ask for a hardship variation
If illness, job loss or another change means you can’t keep up, contact your lender’s hardship team before you fall behind. It may change your loan terms, or pause or reduce your repayments for a time. Explain what happened, how long you expect it to last and what you can afford.
Frequently asked questions
Usually not automatically. On most loans the required repayment stays the same and the extra money shortens the loan. Some lenders will recalculate the minimum repayment after a lump sum if you ask. Either way, check whether you can redraw the extra later if you need it, because access depends on your loan terms.
It depends on your balance and term. On a hypothetical $650,000 loan with 25 years left, cutting the rate from 6.60% to 6.10% lowers repayments by about $202 a month, or about $2,420 a year. Moneysmart says variable rates on the market can differ by more than 2%, so it’s worth checking yours at least once a year.
Possibly. If you have less than 20% equity in your home, the new lender may charge LMI, which can outweigh the savings from a lower rate. Moneysmart suggests asking your current lender for a partial refund of the LMI you paid if you switch. Get a valuation estimate early so you know where your equity sits.
Yes, if you pay half your monthly repayment every fortnight. There are 26 fortnights in a year, so you make the equivalent of 13 monthly repayments instead of 12. The extra month goes off the loan, which cuts interest and shortens the term. Paying the same yearly amount in fortnightly instalments saves much less.
Yes, but it must give you reasons. If you’re not happy with the answer, use the lender’s internal dispute resolution process. If that doesn’t resolve it, you can complain to the Australian Financial Complaints Authority for free. A free financial counsellor from the National Debt Helpline (1800 007 007) can help you prepare your request and negotiate.
Sources
This article is general information only and doesn't take your objectives, financial situation or needs into account. Figures and eligibility rules change; check the official sources above or talk to us before you act. Keystone Home Loans Pty Ltd ATF BEMA Family Trust, Credit Representative Number 564704 is authorised under Australian Credit Licence Number 384704.
Written by
Phillip Bui
Founder and Principal Mortgage Broker at Keystone Home Loans, based in Arncliffe, NSW. Accredited Mortgage Broker and Full Member of the Mortgage & Finance Association of Australia (MFAA).
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