How long should my home loan be?

Bayley Clarke · Mortgage broker on the road · Last checked 12 November 2026 · 8 min read

The short answer

Your loan term sets your minimum repayment, not your finish line. A longer term means a lower minimum and more flexibility. What you actually pay decides when the loan is gone.

For most people that means a 30 year term with the option to pay it like a shorter one. A 40-year term can lift what you can borrow, at the cost of more interest and often a slightly higher rate. And refinancing doesn't have to reset you to 30 years unless you choose it.

The term sets your minimum, not your finish line

The term is the period the bank uses to work out your contracted repayment, the amount you're on the hook for every month no matter what. Take a 20 year term and the minimum is set to clear the loan in 20 years, so it's noticeably higher than the same loan over 30. And you can't just ring up and drop it back later. Extending the term generally means a fresh credit assessment or a refinance: Should I take a 30 year loan term, or one that's shorter?

Most banks quote a true weekly figure: monthly, times 12, divided by 52. Some quote an accelerated figure, the monthly amount divided by four, which looks higher for the same loan. Ask which one you're being shown before you compare: What will my repayments be per week?

Want to see your repayment on each term?

Book a call and I'll show you the minimum on 25, 30 and 40 years for your loan, per month and per week, and what paying it like a shorter term actually does.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the numbers.

30 year or 25 year mortgage? Take 30, pay it like 20

If you've got surplus cash flow and want the loan gone sooner, what I'll typically do is set the loan up on a 30 year term and show you the repayment needed to clear it in 20, or 25, whatever the goal is. If life happens, you fall back to the 30 year minimum without missing anything, then go back to the bigger repayment when things settle. Same finish line, without the handcuffs.

This works best on a variable loan, where extra repayments are generally unlimited, or with an offset doing the same job. Fixed loans usually cap the extra you can pay each year. The deeper version of paying it off faster lives in Offset, redraw and paying your home loan off faster

Is a 40 year home loan a good idea? More borrowing, more interest

Stretch the same loan over 40 years instead of 30 and each repayment is smaller, so the bank's calculator says you can afford a bigger loan. If you're in your 20s and it's still likely to be paid off well before retirement, it can make sense: Is a 40-year home loan a good idea if it means I can borrow more?

The catch is twofold. Only a small number of lenders offer a 40-year term, and they generally price it slightly higher than the same loan over 30. And ten more years of repayments means a lot more interest over the life of the loan, with the balance coming down slower in the early years. Start one in your mid 30s or later and the bank will ask how it gets paid off before retirement. One more thing if you're a first home buyer: the 5% Deposit Scheme only supports loans with a term of up to 30 years, so a 40-year loan and the scheme don't go together.

Used well, it's a safety net: a low minimum for the tight months, and more than the minimum whenever you can.

Does refinancing reset my loan term?

No, not unless you choose to. A refinance is a new loan, so the term is a blank field, and most application forms default to 30. If nobody changes it, five years of progress quietly turns into 35 years of repayments across the two loans. You can match the term you've got left, shorten it if your cash flow has grown, or reset to 30 for the lower minimum and keep paying what you were paying: Does refinancing put me back to a 30 year loan term?

The third option is the one most people land on, and it's fine as long as the extra repayments actually happen. Same after a rate cut: your repayment often doesn't drop on its own, and leaving it there quietly takes time off the loan: Do repayments auto-adjust after an RBA cut, and do banks even pass it on?

Interest only home loans: the term inside the term

An interest only period is a shorter term sitting inside your loan, generally a few years at a time. Your repayment covers the interest and nothing else, so the balance doesn't move. Banks usually charge more for it, especially on a home you live in: Interest only: what does it cost, what happens when it ends, and can I switch back?

The part that catches people is the end. When the interest only period finishes, the loan rolls onto principal and interest over the years that are left, not the full original term. Five years interest only on a 30 year loan means paying the whole debt off over 25, so the repayment jumps by more than people expect. You can usually switch back to principal and interest at any time, and extending interest only generally means a fresh assessment, so plan the end before it arrives. The full side by side is in Interest only or principal and interest: which one should I pick?

Fortnightly repayments: trick or myth?

It depends how your bank works it out. A true fortnightly repayment takes the monthly amount, times 12, divided by 26. Same money, sliced differently. An accelerated fortnightly repayment is the monthly amount halved. There are 26 fortnights in a year, not 24, so you end up making one extra monthly repayment every year without noticing, and all of it goes off the principal: Are fortnightly repayments really a trick to paying off your home loan sooner, or is it a myth?

If yours is a bit less than half the monthly figure, you're on true fortnightly. Set the payment to half the monthly amount yourself and you get the accelerated effect, as long as your loan allows extra repayments.

The honest part

The term on your contract is mostly about how much room you give yourself. The finish line comes from what you actually pay. A long term with good habits beats a short term you can't keep up with, and the people who get caught out are usually the ones who reset to 30 and started paying the new minimum without noticing.

Set your term up properly from day one

Tell me what you owe, what you earn and when you want the loan gone. I'll line up the term, the repayment and the features that get you there, across the lenders.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the numbers.

Common questions about home loan terms

Should I get a 30 year or 25 year mortgage?+

If you can afford the higher repayment, a common approach is a 30 year term paid like a 25 year one. You get the same finish line, and if life gets tight you can fall back to the lower 30 year minimum without asking the bank to rework the loan.

Is a 40 year home loan a good idea?+

It can be if it gets you into the market and you're young enough to pay it off well before retirement. The trade is more interest over the life of the loan and often a slightly higher rate. Use the lower minimum as a safety net and pay more whenever you can.

Does refinancing reset my loan term to 30 years?+

Only if you let it. A refinance is a new loan and most forms default to 30 years, but you can match the term you have left, shorten it, or take 30 and keep paying your old repayment so the extra goes off the principal.

Do fortnightly repayments pay off a loan faster?+

Only if they're accelerated. Half your monthly repayment paid every fortnight adds up to one extra monthly repayment a year. A true fortnightly repayment is the same money spread differently and makes next to no difference.

What happens when my interest only period ends?+

The loan rolls onto principal and interest over the years left on the loan, so the repayment can jump more than you expect. You can usually switch back earlier, and extending interest only generally needs a fresh assessment, so plan ahead.

Next question

Offset, redraw and paying your home loan off faster

Once the term is set, this is how the finish line actually moves.