A mortgage is often described by its purchase price: “We bought for $800,000.” But the price of the property is not the same as the lifetime cost of owning it with borrowed money.
Interest is the missing number. It is what the bank charges for lending you the balance, and it can add hundreds of thousands of dollars to the cost of a home.
That matters in 2026. Typical variable home-loan rates are around 6% or more, while the RBA cash rate was held at 4.35% in August. Moneysmart notes that over a 25- to 30-year loan, total interest can exceed the original amount borrowed. That is not a reason to panic; it is a reason to see the maths clearly and use the levers you can afford.
A $600,000 mortgage can cost more than $1.3 million
Consider an illustrative owner-occupier loan of $600,000, at a 6.2% variable rate, with a 30-year term. Ignore fees and assume the rate never changes, purely to make the comparison simple.
The principal-and-interest repayment is about $3,675 a month.
Over 30 years, that works out to roughly:
- Total repayments: $1,323,000
- Original amount borrowed: $600,000
- Total interest: about $723,000
In other words, the interest is greater than the amount borrowed. Before you add rates, insurance, repairs, strata levies or the deposit, the $600,000 loan itself has a lifetime bill of more than $1.3 million.
Real life will not be this neat. Variable rates move, borrowers refinance, make extra payments, redraw money, sell, or change loan terms. But the example explains why the early years feel frustrating: much of each scheduled payment goes to interest rather than reducing the debt.
In the first month on this example loan, interest is about $3,100. Of the $3,675 repayment, only around $575 reduces the principal. As the balance falls, the interest component falls too. Getting the balance down earlier changes the whole curve.
Why an extra payment early matters so much
Mortgage interest is generally calculated daily on what you still owe. Pay down the balance, and there is less interest to charge from then on.
Suppose you put a $10,000 tax refund, bonus or inheritance straight onto the $600,000 loan at the start, while keeping repayments at $3,675 a month. In this simplified example, you would finish about 13 months earlier and save roughly $48,000 in interest.
The same $10,000 paid in year 25 still helps, but it has far less time to reduce future interest. That is why early extra repayments can be powerful.
This does not mean empty your emergency fund to attack the mortgage. A broken car, urgent dental bill, job loss or rent-free period between homes can quickly turn a good intention into expensive credit-card debt. Australian card rates average about 20.99% a year according to RBA data, so keeping accessible cash can be financially sensible.
Fortnightly repayments: check the fine print
“Pay fortnightly” is useful advice only when you understand what the lender actually does.
On our $3,675 monthly repayment, a true fortnightly setup is usually $1,837.50 every two weeks. Because there are 26 fortnights in a year, you pay $47,775 annually — the equivalent of 13 monthly payments, rather than 12.
That one extra monthly payment a year makes a meaningful difference. On the illustrative $600,000 loan at 6.2%, paying $1,837.50 every fortnight would repay the loan in roughly 25 years and 10 months, instead of 30 years. Interest falls to about $559,000 — a saving of around $164,000.
But some lenders simply collect half the monthly amount twice a month. That is not the same as fortnightly payments, and may not create an extra annual repayment. Ask these questions:
- Is the payment taken every 14 days, or twice each calendar month?
- Is interest calculated daily?
- Are extra repayments free on this loan type?
- Is there a cap on extra repayments, especially with a fixed rate?
- Can you redraw money later, and are there fees or limits?
The smaller change that may suit a tight budget
Many households cannot comfortably find an extra full repayment each year. Finder’s 2026 Home Loan Report says more than half of Australian mortgage holders spend over 30% of take-home pay on repayments, and about 1.4 million spend at least 40%. Roy Morgan’s May 2026 figures also put 29% of mortgage holders at risk of mortgage stress.
So start with a number that does not wreck your cash flow.
If the household in our example paid $100 extra each fortnight — $1,937.50 rather than $1,837.50 — it would add $2,600 a year to the loan. The mortgage would be paid off in about 23 years and 7 months, with interest of around $495,000. That is roughly $228,000 less interest than making the original monthly repayment for 30 years.
These estimates assume the same 6.2% rate throughout. They are illustrations, not promises. Use your lender’s repayment calculator with your own balance, rate and remaining term before changing direct debits.
A practical order of operations
If you want to reduce your mortgage’s lifetime cost, try this sequence:
- Find your current balance, interest rate, repayment amount and remaining term in your loan app or statement.
- Build or maintain a cash buffer before committing every spare dollar to the mortgage.
- Clear very high-interest debt first, particularly revolving credit-card debt.
- Ask your lender about offset accounts, redraw rules and extra-repayment limits.
- Set a small automatic extra repayment after payday, then review it in three months.
- Put part of a pay rise, bonus or tax refund toward the principal if your budget allows.
- Review the rate and features at least yearly; refinancing costs and fees matter, not just the advertised rate.
A mortgage is a long commitment, but you do not need one dramatic move to improve it. A modest extra payment, made consistently and without putting your household under strain, can buy back years of financial breathing room. Start by knowing your numbers, then make the next affordable change.
This article is general information only and not personal financial advice.