Cut 15 Years Off Your Mortgage: The Pros, Cons of Paying off Your Home Loan Sooner.
- Jaeneen Cunningham
- Jun 30
- 6 min read
Updated: Jul 4
When it comes to choosing the term of your home loan, one of the most important decisions to consider is the Loan Term - the period of time over which you will pay the loan off under the terms of loan contract.
Every mortgage borrower dreams of paying their home loan off sooner and the day they no longer have to fork out those monthly payments to their lender, being able to spend the money how they wish while owning their home outright.
While the 30-year loan remains the most popular choice in Australia due to its lower monthly repayments, some people are starting to consider the benefits of a shorter loan terms of 15 years.
But would a 15-year mortgage make financial sense for you? What are the trade-offs between affordability and long-term savings? And how does this impact your ability to qualify, especially under the bank’s assessment rate?
In this article, we’ll break down the pros and cons of a 15-year mortgage, compare it with a 30-year loan, and run the numbers for two example loan sizes: $320,000 and $520,000.
Understanding 15-Year vs 30-Year Mortgages
A 15-year mortgage is exactly what it sounds like: a home loan that you are contracted to pay off in 15 years instead of the traditional 30. This will mean:
Higher monthly repayments, but
Lower interest paid over the life of the loan
On the other hand, a 30-year mortgage offers:
Lower monthly repayments, but
More interest paid in total
Key Factors to Consider When Choosing Between 15 and 30 Years
1. Monthly Repayments
The shorter the term, the higher the monthly repayments. This is the biggest barrier for most borrowers when considering a 15-year loan.
2. Total Interest Paid
A 15-year loan saves you a significant amount in interest—often tens or even hundreds of thousands of dollars.
3. Bank Assessment Rates
Australian banks don’t assess your loan at the actual interest rate—they add a buffer (typically 3%) to ensure you can afford repayments if rates rise. This has a big impact on borrowing power, particularly for shorter-term loans with higher repayments.
4. Lifestyle and Cash Flow
With higher repayments, you have less disposable income for things like holidays, education, or emergencies. This could lead to cash flow stress if your circumstances change (e.g., job loss, starting a family, etc.).
5. Loan Purpose and Investment Strategy
If you’re planning to invest, a 30-year term might make more sense as it frees up cash for other assets or property. If it’s your forever home, paying it off quicker might be a better emotional and financial win.
Case Study: Comparing Two Loan Amounts
Let’s run a side-by-side comparison of 15-year vs 30-year mortgages at a 5.5% interest rate (for simplicity and realism), using two loan sizes:
Loan A: $320,000
Loan B: $520,000
Loan A: $320,000
Term | Monthly Repayment | Total Repaid | Interest Paid |
15 Years | $2,623 | $472,140 | $152,140 |
30 Years | $1,817 | $654,120 | $334,120 |
Savings with 15-Year Loan:
$181,980 in interest
Loan repaid 15 years earlier
Monthly Repayment Difference:
$806/month
Loan B: $520,000
Term | Monthly Repayment | Total Repaid | Interest Paid |
15 Years | $4,264 | $767,520 | $247,520 |
30 Years | $2,953 | $1,063,080 | $543,080 |
Savings with 15-Year Loan:
$295,560 in interest
Loan repaid 15 years earlier
Monthly Repayment Difference:
$1,311/month
Pros of a 15-Year Mortgage
✅ 1. Huge Interest Savings
The biggest win is the dramatic reduction in interest. You pay off the loan quicker, so the bank earns less interest from you.
✅ 2. Faster Equity Growth
With more of each repayment going toward principal (rather than interest), you build home equity faster—giving you a safety buffer if property prices fall or you want to refinance
.
✅ 3. Emotional Satisfaction and Reduced Financial Stress Long-Term
Imagine being mortgage-free 15 years earlier! This brings peace of mind and freedom to retire earlier, travel, or invest more heavily later in life.
✅ 4. Protection Against Rising Rates
Because you’re paying down the principal faster, you're less vulnerable to rising rates in the long term—even though your repayments are higher upfront.
Cons of a 15-Year Mortgage
❌ 1. Higher Monthly Repayments
The biggest drawback is affordability. As seen in the case studies, repayments can be $800 to $1,300 more per month depending on the loan size.
❌ 2. Reduced Borrowing Power
When lenders assess your ability to repay a 15-year loan, they use a higher assessment rate AND you need to demonstrate you can afford the larger repayments. This can reduce how much you qualify to borrow—possibly locking you out of the home you really want.
❌ 3. Less Flexibility for Life Events
You have less spare cash each month for other financial goals. It can be harder to afford:
Unexpected medical bills
Starting a family
Education costs
Holidays or investing
❌ 4. Opportunity Cost
By tying up more money in your home, you may miss out on higher returns from other investments like shares or additional property—especially when mortgage rates are relatively low.
How the Bank's Assessment Rate Affects You
As of 2025, most lenders apply a 3% buffer above the interest rate you’ll actually pay. So if your loan rate is 5.5%, they assess your ability to repay at 8.5%.
This impacts shorter loans more because their monthly repayments are already high. Here’s how that plays out:
Let’s say your income is $90,000 p.a., and you have minimal debts.
On a 30-year loan of $520,000, your monthly repayment is $2,953, but the bank assesses it at approx. $3,926/month (using 8.5%). That’s already tight.
On a 15-year loan, repayment jumps to $4,264/month—assessed at $5,667/month. You may fail serviceability unless your income is $130,000+.
So while the 15-year term saves money long-term, not everyone qualifies.
Tips for Deciding Which Term is Right for You
✔️ Choose 15 Years If:
You have stable, high income
You want to be debt-free ASAP
You’re close to retirement and want to clear your mortgage quickly
You can comfortably afford the higher repayments (even with a buffer)
You aren’t relying on the bank to max out your borrowing
✔️ Stick With 30 Years If:
You need to maximise borrowing power to buy your ideal home
You have other goals (children, travel, investments)
Your cash flow is tight, or your income varies
You want to retain flexibility and reduce the risk of cash flow stress
Smart Compromise: Take a 30-Year Loan and Pay It Like a 15
If you’re unsure about committing to higher repayments but still want to save on interest, one strategy is:
Take out a 30-year loan, but make extra repayments equal to what you would pay on a 15-year term.
This gives you:
Flexibility in case of hardship
The ability to redraw extra payments if needed
All the interest savings (and then some!)
A way to pay off the loan in 15 years—or faster—without locking yourself in
Just make sure your loan has a redraw facility or offset account to support this.
Bottom Line: Is a 15-Year Mortgage Worth It?
Yes—if you can afford it.
A 15-year home loan can save you a fortune in interest and help you own your home outright much sooner. However, the higher monthly repayments can limit your borrowing capacity and reduce flexibility, especially under strict lender assessment conditions.
For most borrowers, especially first-home buyers or families, a 30-year loan with extra repayments might offer the best of both worlds—long-term savings with short-term breathing room.
Speak to a Mortgage Broker to help you pay your home loan sooner
Understanding your borrowing power, income position, and long-term goals is critical. An experienced mortgage broker like Etairos Finance can:
Run serviceability calculations
Show you lender options with more flexible criteria
Structure your loan to allow extra repayments or offset accounts
Help you make a decision that balances debt reduction and lifestyle
Final Thoughts
In a world where interest rates and property prices fluctuate, the right mortgage term is about more than just numbers—it’s about how it fits your life stage, income, and goals. Also, there are other steps you can take to help you get on top of that home loan.
Whether you choose a 15-year mortgage to eliminate debt faster or stick with 30 years for flexibility, understanding the real cost of your decision will empower you to take control of your financial future.
Need help figuring out the right home loan strategy for you? Reach out to Etairos Finance for personalised mortgage advice and smarter lending options that align with your goals.
Comentários