Making Extra Mortgage Repayments : Is It Worth It?

If you own a home, or are looking to buy one, paying your loan off quicker is a priority. A common feature on home loans is extra repayments, paying more than the monthly minimum in order to try to pay off the loan early. Are these extra payments worth the hassle of having less cash each month? 

Extra Repayments

In general, the answer is yes. Extra repayments leverage the power of compound interest to help you own your home sooner. Compared to putting money into other assets, putting money into your home loan doesn’t incur taxes and is very effective at increasing your net worth and improving your financial health.

Making extra repayments will quickly reduce the balance of the home against which your monthly payments are calculated. The more of the balance (or principal) that is paid off, the more of the home you own in financial terms. Making extra repayments means you build equity and end up owning your home as an asset sooner. 

Prioritise Payments

Extra repayments are great, so does that mean you should pay extra each month? Not necessarily. Owning your home sooner is a nice goal to have, but it’s not always priority number one. Make sure to leave enough of your salary left over each month to take care of your regular living expenses, bills, and put away some savings.

Depending on the type of loan you have, your extra repayments may or may not be easily accessible so make sure you have enough liquid funds to get you through today’s needs and what tomorrow may bring. If you have a simple redraw facility for instance, accessing your funds may require some paperwork and time. And you may even be limited to the number of redraws you can do in a year.

Credit Card Payments

An interesting decision that first home owners often struggle with is whether to put more money into the mortgage or the credit card bill. There are a few things to keep in mind here. First of all, unlike a credit card bill which can be either paid in full, paid in the minimum, or even sometimes not paid at all for a month without serious damage to your credit history, a mortgage payment absolutely must be paid in full and on time. Missed mortgage payments will severely credit history and financial health, so make sure to get a loan you are sure you can afford and prioritise your monthly income to making that payment.

Once the minimum monthly payment is made, the decision then becomes whether to put excess savings into extra repayments on the mortgage or to pay down credit card debts. The rule with debt is to pay down the most expensive debt first. Credit card interest rates are generally higher than mortgage rates, so if you are carrying significant credit card debt, it can be wise to try to pay that off first, before making extra repayments on the mortgage. 

Extra repayments are in general a great idea if you can afford them. For more information about paying off your home loan, speak with First Home Owners Centre today. 

Visit the First Home Owners Centre website at for more details about our services and available financing options for first time home buyers.

First Home Owners Centre Contact Information
24/7 Sales Enquiry line: (08) 6144 1088