The Top 5 Strategies on How to Pay Your Loan Off Faster

8th September 2025

Finance & Budgeting Pre-Construction Legal & Contracts First Home Buyer Investor Upsizing & Downsizing

In this episode of the Home Building Hub Podcast, Colin and Darren chat with mortgage expert Scott Baker from Toast Finance about the top five proven strategies to pay off your home loan faster. Discover practical tips on using offset accounts, repayment frequency, and smart refinancing to save thousands and own your home sooner.

The Top 5 Strategies on How to Pay Off Your Home Loan Faster in Australia

Paying off your home loan faster is one of the smartest financial moves you can make. In this episode of the Home Building Hub Podcast, hosts Colin Bischof and Darren Brennan welcome back Scott Baker, CEO and Founder of Toast Finance, to share practical and proven strategies to help Australian homeowners save thousands in interest and reduce years off their loan term.

Whether you’re a first home buyer, refinancing, or building your dream home, these expert tips will help you understand how to make your money work harder.

1. Change Your Repayment Frequency

One of the simplest ways to cut years off your mortgage is to switch from monthly to fortnightly repayments.

Here’s why it works:

• There are 26 fortnights in a year, compared to 12 monthly payments.

• If you simply halve your monthly repayment and pay that amount fortnightly, you’ll effectively make one extra month’s repayment per year.

• That extra payment directly reduces your loan balance and interest charges.

Pro tip: Set this up right at the start of your loan when interest charges are at their highest.

2. Make Extra Repayments Whenever You Can

Even small extra repayments can make a big difference over the life of your loan. Because interest is calculated daily, any additional payment - no matter how small - helps reduce the total interest charged.

Ways to do this include:

• Setting up an automatic direct debit for an extra repayment each month.

• Using your tax refund or bonus to make lump-sum contributions.

• Paying a little extra on your scheduled repayments to gradually shorten your loan term.

3. Use an Offset Account to Reduce Interest

An offset account is one of the most powerful tools to help you pay off your home loan faster.

Here’s how it works:

• An offset account is a regular everyday account linked to your home loan.

• The balance in your offset account reduces the interest-bearing balance of your loan.

• For example, if you owe $500,000 and have $50,000 in your offset account, you’ll only be charged interest on $450,000.

Additional benefits:

• Full access to your funds whenever you need them.

• Works seamlessly with your budgeting system - you can have multiple offset accounts for bills, savings, or holidays.

• Better than high-interest savings accounts, as the “interest saved” is tax-free.

Tip: Treat your offset account like a savings account while you have a mortgage. Every dollar sitting there is saving you interest.

4. Understand the Difference Between Redraw and Offset

Both redraw and offset accounts help reduce interest, but they work slightly differently:

• Offset account: Separate everyday bank account linked to your loan. You can access your money anytime.

• Redraw facility: Extra funds you’ve paid directly into your loan, which you can later “redraw” if needed.

Financially, both reduce your interest. The difference lies in flexibility and personal preference.

5. Be Smart About Refinancing

Refinancing can be a great way to secure a better rate or more flexible features. However, be cautious:

• Don’t reset your loan term back to 30 years if you’ve already paid off several years. For example, if you’ve been paying for 5 years, refinance over 25 years instead.

• Understand that the early years of a loan are interest-heavy, so constantly restarting resets the clock.

• Ask your broker to show you the difference in repayments and interest saved by keeping your current term length.

Remember: Refinancing isn’t always about getting the lowest rate - it’s about finding the right features, such as offset accounts, redraw facilities, or construction-friendly lenders.

Avoid the “Uncle Gary” Trap

As the hosts say, don’t rely on outdated advice from “Uncle Gary” at the family barbecue who insists you should stay with your lifelong bank. Times have changed.

• 75% of all home loans in Australia are now arranged through brokers.

• Brokers work in your best interest, unlike banks, which are not obliged to do so.

• A good broker, especially one experienced in construction loans, can find the right solution to suit your goals - not just the lender’s.

Common Mistakes That Slow Down Loan Repayment

• Not using offset or redraw facilities correctly.

• Spreading your money across multiple unrelated bank accounts.

• Not reviewing your loan features regularly.

• Failing to ask questions about how to structure your accounts for maximum benefit.

Key Takeaways

• Switch from monthly to fortnightly repayments to save years of payments.

• Use offset accounts wisely - every dollar counts.

• Make extra repayments whenever possible, even small ones.

• When refinancing, don’t reset the loan term unnecessarily.

• Work with an experienced mortgage broker who understands construction and investment loans.

Glossary of Terms

• Offset Account: A bank account linked to your home loan that reduces the balance you pay interest on.

• Redraw Facility: Allows you to withdraw extra repayments you’ve made on your loan.

• Refinancing: Replacing your current loan with a new one, often to access better rates or features.

• Amortised Loan: A loan structure where early repayments are mostly interest, and later repayments are mostly principal.

• Principal: The amount you originally borrowed.

• Interest: The cost charged by the lender for borrowing money.

FAQs

Q: How much faster can I pay off my home loan by switching to fortnightly repayments? A: Switching to fortnightly repayments can save you the equivalent of one full month’s repayment each year, potentially cutting several years off a 30-year loan.

Q: Is it better to keep money in an offset account or a savings account? A: If you have a home loan, an offset account is usually more beneficial. It reduces the amount of interest you pay on your loan and isn’t taxed like a savings account.

Q: Should I refinance my home loan now that rates are changing? A: Refinancing can be helpful, but always review the total cost, features, and term. A qualified broker can compare your options and ensure you’re not extending your loan unnecessarily.

Listen to the Full Episode

🎧 Watch or listen to the full episode here: The Top 5 Strategies on How to Pay Your Loan Off Faster

About the Home Building Hub Podcast

The Home Building Hub podcast, hosted by industry experts Colin Bischof and Darren Brennan, is Australia’s premier resource for new home buyers. With weekly episodes featuring special guests, the podcast provides objective, high-quality insights into the home building process - completely free and without sales pitches. From understanding financing options to navigating the complexities of building a new home, each episode is packed with actionable advice and tips. Explore more episodes at http://www.homebuildinghub.com.au and join our growing community of informed home buyers.

Disclaimer

This article was generated by AI based on a transcript of our podcast episode and may contain inaccuracies or omissions. Whilst we’re all about providing value to you, this article should not be considered as legal or financial advice. It contains general information only and is based on the content discussed during the podcast episode. This information is relevant to the episode’s release date and may not be applicable at the time of reading. Always seek independent professional advice tailored to your personal situation before making any legal or financial decisions.