How Long Does it Take to Pay Off a Mortgage?

A home loan has a set term length – but you can pay it off much sooner if you know how. Find out your options with Savvy.

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, updated on August 8th, 2023       

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How long does it take to pay off a mortgage? If you’re looking for the answer, Savvy has you covered.  We have calculators to help you crunch the numbers, plus great tips on how to reduce the length of time it takes to pay off your mortgage.  Savvy can help with all your finance comparison needs to help you find your perfect home loan.

How long does it take to pay off a mortgage?

Most lenders in Australia offer standard loan terms to first time buyers of either 25 or 30 years, so this could be regarded as the average length of time it takes to pay off a mortgage.  However, statistically, most people will refinance their mortgage several times before they finally pay it off.

Naturally, the time it takes to pay off a mortgage depends on how big the mortgage is, the interest rate charged on your loan and the size and frequency of the repayments made to pay off the loan.  You can use Savvy’s home loan repayment calculator to tell you what your loan repayments will be for any size of home loan.  This will help you find out how long it’ll take you to pay off your home loan depending on the size of repayments you can afford.

In Australia, the average mortgage size is $595,568, according to Australian Bureau of Statistics’ (ABS) Lending Indicator Data for November 2021.  For first homebuyers, the average loan size reduces to $471,425.  However, this varies dramatically from state to state, ranging from the lowest of around $421,000 in SA to the highest of over $769,000 in NSW.  It makes sense, therefore, that Aussies in NSW will take longer on average to pay off their loans.

What can I do to reduce my loan pay-off time?

Paying off your home loan earlier boils down to a few basic options:

  • Make larger regular repayments to pay down your loan sooner
  • Repay the same amount but make your repayments more frequent (such as paying your mortgage weekly or fortnightly instead of monthly)
  • Make lump sum repayments in addition to your usual monthly mortgage repayments (for example, use your annual tax refund to pay a sum off your mortgage each year)
  • Refinance your home loan to one with a lower interest rate, but keep your repayments the same (so in effect, you make larger repayments which will pay your loan off sooner)
  • Divert any additional funds you may have saved up for other purposes into an offset account or pay them off your loan directly

You can use any of these techniques, or a combination of them, to reduce the time it will take you to pay off your home loan.  Setting yourself a savings goal and having a mortgage-reduction plan in writing will increase your chances of successfully paying off your home loan sooner.

How much could I save if I pay my loan off earlier?

All of the techniques listed above will not only enable you to pay your loan off more quickly but also save you money in interest payments.  Remember that interest is calculated daily, so every little bit you pay off your home loan will reduce interest charged in the future.  In addition to reducing the daily interest payment, additional repayments will also pay your loan down more quickly, saving you months or even years in loan payments, which can equate to thousands of dollars saved overall.

For example, on a $450,000 loan taken out over 30 years at a 2.5% interest rate, the monthly repayment would be $1,779 per month, and in total you’d pay $190,096 in interest.  We can also determine:

  • if you paid your loan more frequently (fortnightly), your repayments would be $821, but you’d only pay $189,738 in interest
  • if you paid weekly, your repayments would be $411 per week and you’d pay $189.584 in interest
  • if you paid an additional $20 a week, you could save up to $14,096 in interest and pay off your loan in 28 years instead of 30
  • if you paid an additional $40 a week, you’d have your loan paid off almost four years earlier and save yourself $26,198 in interest.

These examples illustrate how paying more off your home loan, or making repayments more frequently, can save you thousands in interest over the life of the loan. 

More of the questions you’ve asked about how long it takes to pay off a mortgage

Is it possible to pay off a home loan in your 40’s?

Yes – if you take out a home loan in your 20’s and apply some of these interest-saving techniques, as well as increase your mortgage payments as your wages increase, it’s very possible to pay off the average mortgage inside 20 years, meaning you can be mortgage-free by your 40’s.

Can I get a home loan for 30 years if it takes me past retirement age?

Yes – there is no legal limit to the age at which you can take out a loan, provided you have the means to continue loan repayments after you retire from your main job.  You may have a second job, stock market investments, a superannuation retirement pension scheme or an investment property which produces an income stream after your retirement age.  This could enable you to continue to pay off your loan after retirement age.

When might I want to keep my home loan open?

There are various scenarios where it may not be in your best interest to pay off your home loan.  For example, you may be a guarantor for your child’s mortgage, using your home equity as security for their loan.  Alternatively, you may have an interest-only loan which you are using as a tax deduction to keep your income in a lower tax bracket.  In both of these scenarios, it may be in your best interests to keep your mortgage open rather than paying it off and closing your loan.

Will I be charged extra fees if I pay off my variable home loan sooner?

No – you won’t be charged early exit fees on a variable home loan, although if you do pay off your loan and decide to close it, you may have to pay mortgage discharge fees (which apply any time a mortgage is removed from a Land Title).  If you have a fixed rate loan, which you decide to end early, early exit fees are likely to be charged.

Can I take out a home loan for less than 25 years?

Yes – just because the standard home loan term is 25 or 30 years doesn’t mean that you have to take out a loan for this length of time.  Before you apply for your loan, use Savvy’s home loan repayment calculator to work out how much you can afford to repay and get an idea of how long you’d like your loan term to be.

Can I extend the term of my loan to reduce my repayments?

Yes – if you're struggling to make your home loan repayments, it's possible to refinance your loan to a longer term to reduce the cost of your instalments.  However, it may be worth looking at other options before deciding to increase your loan length if you are suffering temporary mortgage stress. Increasing your loan amount to consolidate other, more expensive debts could be one option to reduce your overall interest payments.

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