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Should I take a 30 year loan term, or one that's shorter?
Bayley Clarke · Mortgage broker on the road · Last checked 1 November 2026 · 3 min read
The short answer
As long as you can show the bank you can afford a shorter loan term, of course you can take a 20 year loan if you want. But what I'll typically tell people with surplus cash flow is we'll set the loan up over 30 years, and here's the repayment you need to make to pay it off in 20.
The difference is flexibility. On a 20 year term, your minimum contracted repayment is set over 20 years and you can't drop it back down unless you rejig the whole loan. On a 30 year term paid like a 20, you get the same result, and if life happens you can fall back to the 30 year minimum.
The 90 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.
What a shorter term actually locks in
Your loan term sets your minimum repayment, the contracted amount the bank expects every month. Take a 20 year term and that minimum is worked out to clear the loan in 20 years, so it's noticeably higher than the same loan over 30. That's the number you're on the hook for, every month, no matter what.
And it's not easy to undo. If things get tight down the track and you want that repayment back on a 30 year footing, you generally can't just ring up and ask. It means rejigging the entire loan, a refinance application for example, or a fresh credit assessment with your lender to extend the term. That's a lot of hassle at exactly the time you don't need it.
My approach: 30 year term, 20 year repayments
So for people who've got a lot of surplus cash flow and want the loan gone in 20 years, what I'll typically do is set the loan up on a 30 year term and show them what the repayments need to be to pay it off in 20. Then off you go. You set up that higher repayment and get on with your life.
If something happens, the car breaks down, or you need to get overseas urgently for family, you can drop back to the default 30 year minimum and not sweat that you've missed a month or two of the 20 year figure. Then when things settle, you go back to the bigger repayment. Same finish line, without the handcuffs. That's what I find makes sense for a lot of clients.
Making the extra repayments count
This works best on a variable loan, where you can generally put in as much extra as you like. Fixed loans usually cap the extra you can pay each year, so the pay-it-like-20 approach gets squeezed while you're fixed. If you're splitting your loan, the variable side is where the extra goes.
An offset account does a similar job. Instead of paying the extra into the loan, you park your spare cash in the offset and it cuts the interest you're charged just the same, while staying yours to use. Either way, the shorter loan comes from what you pay, not from what the contract says.
The honest bit: the 30 year term only works if you actually pay it like 20
Setting up a 30 year loan and paying the minimum means a 30 year loan, with a lot more interest paid over the life of it. The flexibility is only worth it if you set up the higher repayment from day one and treat the minimum as the emergency option, not the default.
You can still pick whatever term you like, as long as the bank is satisfied you can afford it for the life of the loan. That comes down to your income, your expenses and any other debts you've got in the background.
Want to see what paying it off in 20 looks like?
A 30 minute call. We work out your 30 year minimum, the repayment that clears it in 20, and how an offset or a split fits around it.
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Next question
How do I actually pay off my home loan sooner?There's no secret sauce. Pay more than the minimum, or grow the balance in your offset.
Related answers
The full guide: Offset, redraw and paying your loan off faster Does refinancing put me back to a 30 year loan term? Can I pay extra off my home loan? Is there a penalty? What is an offset account? What is a split loan, and how do people use it?Not your question? Book a call and ask it, or call 0437 189 939.