How to Save Money on Your Home Loan in Australia

A 0.5% reduction on a $600,000 mortgage saves approximately $180,000 in interest over a 30-year loan term. Australian mortgage holders are among the most rate-sensitive in the world, and yet a significant proportion are paying 0.5–1.5% more than they need to, simply through inertia. Here's how to fix that.

Step 1: Know Your Current Rate

Check your most recent mortgage statement or log into your bank's online portal. Note:

• Your current interest rate
• Whether it's variable, fixed, or split
• Your outstanding balance
• Your monthly repayment

Many Australians don't know their exact mortgage rate — and those who don't are almost always overpaying.

Step 2: Check the Market

The best current home loan rates for owner-occupied, principal and interest loans are available at Canstar, Finder, and RateCity. In mid-2025, the most competitive variable rates from online lenders and smaller banks sit around 5.5–6.0% p.a., while many big four bank customers are on 6.2–7.0%.

The gap between the cheapest and most expensive mortgages for equivalent borrowers is often 0.5–1.0%.

Step 3: Request a Rate Reduction From Your Current Bank

Before refinancing, call your bank's retention team and ask for a rate reduction. This is the fastest and lowest-effort route.

Script: "I've been reviewing my mortgage and I've seen comparable loans at [rate] with [lender]. I'd like to stay with [bank], but I need a rate that's competitive. Can you offer me a rate review?"

Banks retain the ability to reduce your rate by 0.2–0.6% instantly through their pricing team. Many will do so to avoid losing a customer — particularly if you have multiple products (home loan, everyday account, credit card) with them.

This single phone call, averaging 20 minutes, can save $5,000–$15,000 over the remaining loan term.

Step 4: Refinance If Your Bank Won't Move

If your bank won't offer a competitive rate, refinancing is a straightforward process. The key steps:

1. Get comparison quotes from at least 3 lenders — a mortgage broker can do this efficiently.
2. Factor in refinancing costs: application fees, legal fees, discharge fees (typically $500–$1,500 total).
3. Calculate the break-even period — how long until the monthly saving recoups the switching cost.
4. Apply with the new lender. Standard approval time is 2–4 weeks.

With a 0.5% rate reduction on a $600,000 loan, the monthly saving is approximately $180. Switching costs of $1,500 break even in 8–9 months. After that, you're ahead by $2,000+ per year.

Offset Account vs Redraw: Understand the Difference

• Offset account: A linked transaction account where the balance offsets your loan principal. Fully accessible, flexible, and the interest saving is effectively a tax-free return.
• Redraw facility: Extra payments made into your loan that you can redraw later. Slightly less flexible — some lenders charge fees or impose minimums on redraws.

If you have surplus savings, an offset account is the highest-return use of that money if your mortgage rate is above current savings account rates.

Making Extra Repayments

Extra repayments directly reduce your loan balance and the interest calculated on it. The effect compounds significantly over time:

• An extra $200/month on a $600,000 30-year loan at 6.5% saves approximately $120,000 in interest and cuts the loan term by 5+ years.
• An extra $500/month saves approximately $230,000 in interest and cuts the term by 9–10 years.

If you receive a tax refund, bonus, or gift, depositing it directly into your mortgage (or offset account) delivers a guaranteed after-tax return equal to your mortgage rate — typically 6–7% in 2025. That outperforms most savings accounts.

The First Home Buyer Government Schemes

For Australians buying their first home, the following schemes reduce entry costs:

• First Home Guarantee: Allows eligible first home buyers to purchase with a 5% deposit without paying LMI (Lenders Mortgage Insurance). Saves $10,000–$30,000 in LMI costs.
• First Home Super Saver Scheme: Allows up to $50,000 in voluntary super contributions to be withdrawn for a first home deposit, with the tax concessions intact.
• State stamp duty concessions: Every state offers stamp duty reductions or exemptions for eligible first home buyers.