The typical home loan is amortised for 25 to 30 years. However, how long it takes to pay off a mortgage depends on various factors such as your repayments, home prices, affordability, interest rates, income and any refinancing done on the loan. According to research by HtAG Analytics, the duration can vary from as few as seven years to as many as 170 years.
What does it mean to pay off a mortgage?
Paying off a mortgage means repaying your home loan and owning the property outright.
There are many paths to property ownership, but the standard has fairly straightforward steps:
- A homebuyer takes out a mortgage over a 20- or 30-year period.
- They pay off the loan in regular fixed increments, usually fortnightly or monthly, over this agreed-upon term, in a process known as amortisation.
- At the end of the mortgage term, the homeowner has fully repaid the home loan and now owns the property.
If you can afford the repayments, you can pay off your mortgage quickly, as Australia has no minimum period. For example, if you take out a home loan for $500,000 and win the lotto or inherit half a million dollars. In that case, nothing stops you from immediately paying out your mortgage and fully owning the property. A repayment fee may apply if you’re in the first few years of repayment.
Other ways to settle a mortgage
Paying off your mortgage, however, isn’t the only way to end the home loan contract. In reality, a large number of mortgages never run their full term.
There are a few different ways to end a mortgage in Australia:
- Repaying the home loan early, often with a lump sum payment.
- Selling the property so the remainder of the mortgage is paid out on settlement
- Transferring the mortgage to someone else
- Refinancing the home loan.
Each option has its advantages and disadvantages. For example, fees or charges may be associated with an early exit, sometimes called a mortgage repayment penalty. However, these generally only apply to the first few years of a mortgage.
Before deciding the best approach for you, it’s best to first check with your lender or financial adviser.
Average time to pay off a mortgage in Australia
It would take 30 years of $3,466 monthly repayments to pay off the average mortgage in Australia.
That is, of course, assuming you have a 30-year principal and interest home loan with a 5.89% interest rate, and you’ve borrowed $584,907 — the average home loan size for owner-occupier dwellings in Australia, according to August 2023 lending indicators from Australian Bureau of Statistics (ABS).
In reality, this ‘average’ mortgage is anything but typical. Instead of assuming everything goes as planned, we can evaluate affordability to consider better how long it might take to pay off a mortgage and own the home outright.
How many years will it take to own your home?
Research from HtAG Analytics uses its ‘years to own’ metric — which considers home prices, interest rates, median wages and other socioeconomic factors — to estimate the actual number of years it would take to pay off a standard 30-year mortgage in different suburbs and councils throughout Australia.
According to HtAG’s data, it could take as long as 170 years to own a house in Queenscliffe, VIC, or as few as 4.41 years in Morawa, WA suburbs.
Here’s a snapshot of the longest and shortest years-to-own periods in major Australian cities:
Averages across Australian states, however, stay within 25 to 45 years. Only NSW, VIC and TAS have average years-to-own that exceed the 30-year mortgage term assumed by HtAG data.
Ways to reduce the length of your mortgage
You can greatly reduce your mortgage term and final payout amount by finding ways to pay more frequently, like fortnightly instead of monthly, or making larger payments.
To illustrate the different ways to pay off a 30-year mortgage with a 5.89% interest rate, let’s use examples based on the average home loan size in Australian states, according to ABS data.
Regularly monthly repayments
Making the minimum repayment inevitably means that the mortgage will run its full term unless you sell the property.
In the example below, we’ve calculated the monthly mortgage repayment for loans of various sizes.
|State||Average home loan size||Monthly repayment||Total repaid over the life of the loan||Total interest paid|
If the minimum is really all you can afford, there’s no need to strain your finances. However, if you have room in your budget and plan to stay in your home long-term, you may decide paying off your mortgage early makes sense.
One simple but effective way to pay off your mortgage faster is to move from monthly repayments to fortnightly ones. You won’t be hugely out of pocket by paying half the monthly amount every two weeks. And the extra amount paid will reduce the total amount owing and the mortgage term.
In the example below, we’ve cut the average monthly repayments in half to see how paying that amount fortnightly instead of the combined amount monthly would affect the life of the loans.
|State||Average home loan size||Fortnightly repayment||Total interest saved||Time saved|
|Australia||$584,907||$1,733||$139,834||24 years 8 months|
|NSW||$722,132||$2,140||$172,975||24 years 7 months|
|VIC||$590,450||$1,749||$140,822||24 years 8 months|
|QLD||$527,463||$1,563||$126,258||24 years 7 months|
|SA||$489,978||$1,452||$117,347||24 years 7 months|
|WA||$475,578||$1,409||$113,638||24 years 8 months|
|TAS||$463,693||$1,374||$110,967||24 years 7 months|
This demonstrates that switching to fortnightly payments can mean
- Paying off your mortgage at least five years early
- Saving more than $100,000 in interest payments over the life of the loan.
Another strategy is to make repayments as if you had a loan with a higher interest rate. You can use a mortgage calculator to see what your monthly repayments would be with a higher rate, and then make those repayments instead.
In the example below, we calculated the monthly repayment for average home loans assuming a 7.89% interest rate. Then, we applied that increased repayment to the 5.89% interest loan to see the impact of the added monthly cost.
|State||Average home loan size||New monthly repayment||Added monthly cost||Interest saved||Time saved|
|Australia||$584,907||$4,247||$782||$270,081||19 years 3 months|
|NSW||$722,132||$5,243||$965||$333,368||19 years 3 months|
|VIC||$590,450||$4,287||$789||$272,591||19 years 3 months|
|QLD||$527,463||$3,830||$705||$243,575||19 years 3 months|
|SA||$489,978||$3,558||$655||$226,301||19 years 3 months|
|WA||$475,578||$3,453||$635||$219,565||19 years 3 months|
|TAS||$463,693||$3,367||$620||$214,136||19 years 3 months|
Making higher monthly repayments similar to these could mean
- Paying off your mortgage more than a decade earlier
- Saving well over $200,000 in interest payments over the life of the loan.
Of course, few are willing or able to repay an additional $600 or more every month, but you don’t have to make such big adjustments to see a striking difference. Just paying more than the minimum each month will help you in the long run.
Other ways to pay off your mortgage early
If you plan to stay in your home long-term, paying off your mortgage early makes sense. However, the time it takes to pay off your mortgage is up to you as the homeowner. Consider your budget, financial goals and how much you feel comfortable paying regularly.
If you can’t make major additions to your monthly expenses, here are some other ways to pay out your mortgage early.
If you usually make 12 repayments yearly, making one or more additional payments could help you meet your goal.
When it comes to making extra repayments, be aware that most of the money in the first five years only goes towards the interest component of the loan. However, every extra dollar you put towards your mortgage will come off the principal while simultaneously reducing the interest payable and shortening the life of the loan, aka a win-win-win. That’s why paying down as much as possible immediately is vital.
You could put similar focus and energy into paying down your mortgage like you may have feverishly saved for a deposit. Think about ways to get extra cash. These could be anything from working overtime in your current job or part-time in a new job, to starting an Amazon business or driving an Uber in your spare time. If you have specific skills like gardening, graphic design or foreign language tutoring, consider finding casual work online through job boards. Also, put any tax refunds, bonuses or other financial windfalls towards your mortgage.
» MORE: 16 ways to find extra cash
Find a more competitive loan
A mortgage is the most significant financial commitment most of us will ever make. Unfortunately, many people simply set and forget mortgage payments without thinking about ways to improve their current arrangement.
Check the structure of your mortgage and the interest rate and see what else is available online. Once armed with information, you should be able to get your current lender to match whatever loan you can find if they want to keep your business.
Alternatively, you could leave if they are unwilling to come to the party. There are always many terms and conditions, so check with a mortgage expert before you change.
Open an offset account
Opening an offset account is another straightforward but effective strategy. An offset savings or transaction account is linked to your mortgage. So, if you have a mortgage of $300,000 but have $20,000 in an offset account, you only pay interest on $280,000.
The beauty of an offset account is that it has all the same features as a bank transaction account so that you can withdraw and deposit funds at any time and have your salary paid directly into the account. Every dollar in the offset account represents less you pay interest on.
Australian Bureau of Statistics, “August 2023 Lending indicators,” accessed October 3, 2023.
Higher than Average Growth, “Unravelling Property Affordability via the “Years to Own” Metric,” accessed October 3, 2023.
Interest-only home loan payments only cover interest for a set time. That means lower monthly mortgage costs during the interest-only period, but the principal amount borrowed doesn’t decrease.