this post was submitted on 10 Sep 2025
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You might also be surprised to know that increasing your payments a little can shave off a lot of interest. Paying 10% extra on your payments saves you about $100k of interest on your $500k loan at 5%, and pays it off about 5 years earlier.
Anything above and beyond the monthly payment can go towards the principal, which is an especially big deal at the start of the mortgage. But be sure to verify that the bank is actually applying it all to the principal as you intend.
https://www.sharonview.org/resources/tools-education/financial-calculators/mortgage-payoff
This tool makes it easy to figure out how much overpayment will save over the life of a mortgage/loan.
Unless you have offset accounts, in which case it's better to hold surplus liquid that offsets the amount owing before interest calculation
That works, but I don't know if "better" is the right word. If you have the same amount offset or paid off, it's the same outcome. The only difference is if you offset then you can spend it - for better or for worse.
You could also bump your payments up and use an offset account for any extra.
Offset is generally considered better because if you have an emergency or financial opportunity you still have access to cash. If you put extra into repayments you're forced to redraw or refinance if you suddenly need funds.