For Australians with money left over after regular expenses, deciding whether to make additional mortgage repayments or invest can involve several competing considerations.
There is no universally preferable approach, and the possible outcomes depend on a variety of factors that are personal to you.
Such things as interest rates, taxes, investment performance, time frames, current personal circumstances and your future goals should all be considered.
As at July 2026, the Reserve Bank of Australia’s cash-rate target is 4.35%, effective from 17 June 2026. The cash rate influences—but does not directly determine—the interest rates lenders charge mortgage customers.
ABS data for the March quarter of 2026 recorded 82,453 new owner-occupier loan commitments, worth a combined $61.4 billion. Dividing the total value by the number of commitments gives an indicative average of approximately $745,000 per new owner-occupier loan.
For illustration, principal-and-interest repayments on a $745,000, 30-year mortgage would be approximately:
- $4,465 a month at 6.0%
- $4,707 a month at 6.5%
- $4,954 a month at 7.0%
These examples exclude fees and assume the rate remains unchanged for the entire term. Actual mortgage rates and repayments vary.
Additional mortgage repayments would reduce the balance on which interest is calculated, saving you money over the life of the loan. The financial effect is comparatively predictable, although access to the money may depend on whether the loan includes an offset or redraw facility.
Fees, fixed-rate restrictions and redraw conditions may also apply. ASIC’s Moneysmart notes that extra repayments made earlier in a loan can reduce total interest, because a larger proportion of early repayments generally goes towards interest.
In comparison, investing offers the possibility of higher long-term returns but involves uncertainty and the risk of loss.
For example, investing $500 each month for 20 years would produce approximately $205,500 at an assumed 5% annual return, $260,500 at 7%, or $333,900 at 9%, before tax, fees and inflation. These are mathematical assumptions—not forecasts—and investment returns are rarely consistent from year to year.
Other relevant factors to include when considering whether it might be better for you to pay off your mortgage faster vs investing can include:
- The remaining mortgage term
- Loan structure
- Emergency savings needed
- Investment time horizon
- Tolerance for market fluctuations
- Taxation
- Diversification
- Liquidity
- The psychological value placed on lower debt.
The comparison may also change as mortgage rates, income, family commitments and market conditions change.
As you can see, there are a variety of factors that can impact what is the right move for you.
We recommend that before you make any decisions, that you discuss your circumstances and ideal outcomes with a professional advisor who can provide appropriate guidance and answer your questions
At Finwell Group, we want you to have control of your financial future, and our team is ready to help you achieve that.
To organise a complimentary review of your circumstances and get your questions answered, visit our website at www.finwellgroup.com.au/book-an-intro/
Alternatively, give us a call on (03) 9017 3235 or email better@finwellgroup.com.au.
General Advice statement
The information in this article is general in nature and does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
