Extra mortgage repayments can reduce the interest you pay and help you pay off your loan sooner. But they don't always reduce the minimum amount you must pay each month.

Whether your repayment size reduces depends on how your lender calculates it and whether it recalculates your repayments after you pay extra. In some cases, you need to request a change. Lowering your repayments may also affect how much money you can access through redraw.

Extra repayments are amounts you pay into your home loan above the minimum required by your lender.

For a principal and interest loan, each scheduled repayment covers interest and pays back part of the amount borrowed. An extra payment reduces the outstanding amount, known as the principal, further.

You can make extra repayments regularly or as a one-off payment.

You might add a set amount to each repayment or round up to a figure that fits your budget.

For example, if your required monthly repayment is $2,150, paying $2,200 adds another $50 to your loan each month. Over a year, you would contribute an extra $600. You may use an online calculator to crunch the numbers and see how extra repayments might reduce your loan balance faster.

You can arrange this through a higher direct debit or a separate transfer, depending on your lender.

A lump sum is an additional payment made at one time. This could come from a work bonus, tax refund, inheritance or savings you decide to put towards your loan.

A lump sum reduces your outstanding balance when it is applied. Regular extra repayments reduce it progressively.

Before paying extra, check your loan’s conditions. Fixed-rate loans often limit additional repayments, and exceeding the allowance may trigger a charge.

Money held in an offset account works differently. It remains in a separate account and reduces the balance used to calculate interest on an eligible linked loan. It does not directly repay the principal.

Extra repayments reduce the amount you owe (the principal amount). With a smaller outstanding balance, less interest is charged than would otherwise apply.

If you keep making the same repayments, less of each payment is needed for interest and more goes towards principal. This can help you repay the mortgage sooner.

However, reducing your repayments after paying extra produces a different result. You free up money in your monthly budget, but repay the remaining debt more slowly than if you maintained the higher payment.

Suppose you owe $300,000 on a principal and interest loan, with 20 years remaining and an interest rate of 6% p.a. Your monthly repayment is approximately $2,149.

You then make a $20,000 extra repayment, reducing the balance to $280,000.

Assumptions: This illustration assumes a constant 6% interest rate, monthly repayments, no fees and no further extra payments or redraws. Actual lender calculations may differ.

Maintaining repayments would clear the loan about two years and five months earlier. Recalculating them over the remaining 20 years would free up approximately $143 a month. Both options reduce interest compared with making no extra payment.

Not necessarily. The balance used to calculate your interest and the calculation used to set your minimum repayment are related, but they are not always the same.

Some lenders calculate required repayments using a scheduled balance or loan limit that allows for funds you could redraw. Others may recalculate repayments using the lower outstanding balance.

This means you can owe less and pay less interest while still being required to make the same monthly repayment.

There is also a difference between your minimum required repayment and your actual payment.

Even if the lender lowers your minimum, your existing direct debit may stay unchanged. You could therefore continue paying the same amount, with the difference becoming an extra repayment.

Check both figures before assuming that paying extra will leave you with more money each month.

You may be able to ask your lender to recalculate your repayments using the reduced balance over the remaining loan term. This is sometimes called mortgage recasting or re-amortisation, although lenders use different terms.

Availability depends on your loan. Some lenders allow eligible borrowers to request a recalculation. Others require a permanent reduction in the loan limit before lowering the minimum repayment.

Recalculating repayments is different from refinancing. You are asking to change the repayment arrangement on your existing loan, rather than replacing it with another loan.

Lower repayments may help if you need more room in your monthly budget. Keeping repayments higher can help you finish sooner and save more interest.

A redraw facility allows you to access eligible extra repayments, subject to your loan’s conditions. It does not necessarily give you permanent access to every extra dollar you have paid.

If lowering your minimum repayment requires a permanent loan-limit reduction, the amount applied to that reduction may no longer be available to redraw.

Under other arrangements, redraw may remain available after repayments are recalculated. However, the available amount can reduce over time. Withdrawing it increases your outstanding balance, increases interest and may cause required repayments to rise.

Before requesting lower repayments, ask your lender:

• What will my new minimum repayment be?
• Will my loan limit be permanently reduced?
• How much redraw will remain available, and can that amount change?
• What happens to my repayments if I redraw later?

Extra repayments are one way to reduce interest. Your repayment schedule, rate and fees also affect the cost of your loan.

Paying fortnightly can increase your annual repayments if you pay half your monthly repayment every two weeks.

For example, a $2,000 monthly repayment totals $24,000 a year. Paying $1,000 every fortnight totals $26,000 across 26 payments, the equivalent of one extra monthly repayment.

The main benefit comes from paying that extra amount. Simply changing the payment frequency does not guarantee the same result, because lenders may calculate fortnightly repayments differently. Check the amount and annual total before changing your schedule.

A lower rate can reduce interest without requiring you to contribute more money.

Ask your lender whether a lower rate is available, then compare alternatives using your outstanding balance and remaining term. Include ongoing fees, loan features and any switching costs.

If you refinance, check whether the proposed repayment uses your existing remaining term or a longer one. A longer term can lower monthly repayments while increasing total interest.

Loan pricing changes, so a rate that was competitive when you signed up may deserve another look later.

With Bheja, you can add your loan details and receive an alert when a better rate is available. You can then assess the potential savings alongside fees, features and eligibility.

Start with Bheja’s free Home Loan Health Check to see how your current rate compares.