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Can I pay extra off my home loan? Is there a penalty?
Bayley Clarke · Mortgage broker on the road · Last checked 3 September 2026 · 3 min read
The short answer
If you're on a variable home loan, there are generally no penalties for paying as much as you like. If you're on a fixed rate, there's a limit on how much extra you can repay, and if you exceed it there may be break costs.
On a variable loan you can absolutely smash your mortgage, pay it off in full tomorrow, put money in, pull money out. On a fixed loan each bank sets its own cap on additional repayments, per year or across the whole fixed period, and that cap is the number to know before you make the payment.
The one minute version. The rest of this page is the detail underneath it.
Variable: ultimate flexibility
If you are on a variable home loan, there is generally no penalty for paying as much as you like. You can pay it off in full tomorrow, put money in, pull money out. There's ultimate flexibility as far as how much you're actually paying off your home loan.
That's the trade you make for a rate that can move. The bank doesn't lock you in, so it doesn't charge you for leaving early or paying down faster. Every extra dollar goes straight to reducing the interest you're charged next month. If you've got an offset, the money does the same job while staying in your own account, which has its own page.
Fixed: there's a cap, and the cap is the whole point
If you are on a fixed rate, there are often limits, which differ by which bank you're actually with, as far as how much you can pay in additional repayments towards your mortgage. Some set it per year. Some set it across the total fixed rate period. It's typically a modest figure, enough for the odd bonus or tax refund, not enough to pay the loan off.
You've just got to be careful there, because if you end up paying more than what they allow, break costs can come into it, and they can be expensive. The bank fixed your rate by locking in its own funding for that term. When you repay early, it can be out of pocket on that funding, and the break cost is it passing that on.
So for you that means: before you throw a lump sum at a fixed loan, find the cap in your loan contract or ask your bank for it. If the lump sum is bigger than the cap, it might be better sitting in an offset on a variable split, or held until the fixed period ends.
The split loan answer
This is a big reason a lot of people run a split: part fixed for certainty on the repayment, part variable with an offset so the extra money has somewhere to go without a penalty. You get the fixed rate's predictability on most of the loan and the variable's flexibility on the rest.
How big each part should be depends on how much surplus you expect to have. Someone paying the minimum and nothing more can fix the lot. Someone about to sell a car, get a bonus or move in a partner's savings wants a decent variable split to absorb it. That's a five minute conversation, and it's worth having before you fix.
The honest bit: the penalty isn't a trick, but nobody reads for it
Break costs feel like a trap because they show up when you're trying to do the responsible thing. They're not hidden, they're in the contract. They're also close to impossible to predict in advance because they depend on where rates have moved since you fixed.
The fix isn't avoiding fixed rates. It's knowing your extra repayment cap before you sign, and keeping your flexible money on the variable side. I'll set the structure up that way if you tell me a lump sum is coming.
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Next question
Should I go fixed or variable?The decision that sets your extra repayment rules in the first place.
Related answers
Offset, redraw or savings account: where should my money sit? Should I wait for rates to drop or the market to dip before I buy? Is the available balance on my home loan really money I can spend?Not your question? Book a call and ask it, or call 0437 189 939.