With mortgage rates at their lowest since the days of black and white TV, this might be the right time to make a serious dent in your home loan.

Lower rates mean any money you have in the bank could be earning less interest. But if you have a variable home loan rate and your lender passes on the cut, you’ll pay off more of your loan faster just by keeping your payments the same. Upping your payments means you can really take advantage of lower rates, saving time and money on your mortgage.

In this short video, AMP Bank explains how an extra $50 a week can chop $50,000 from a loan of $400,000 - and pay off the loan four years earlier.

When fifty bucks seems a lot

If fifty bucks sounds like a lot, even twenty can make a dent in your repayments over time, as long as interest rates stay low. That’s around one cup of coffee a day in a working week.

Because interest on home loans is calculated daily, even chipping in small amounts can make a big difference over time. The table below shows how an extra $20 a week on a $300,000 loan takes over two years and $20,000 off. Further up the scale, an extra $100 a week slices off over three years and the best part of $100,000 over the life of the loan.

Of course, we’re all different. Whether you’re willing or even able to make extra repayments depends on your circumstances.

Good times, bad times

Depending on your situation and financial goals, a cut in interest rates may not be all good news. If you have a fixed rate, your mortgage payments are unaffected by the interest rate cut.

If you’re unsure whether your loan is fixed or variable, now is a good time to check. If you’re on a fixed rate, you might talk to an expert to find out if there’s a better deal out there, or whether switching to a variable rate might work for you.

Other things you could do

There’s more to low interest rates than your mortgage. For instance, you might instead choose to pay down bad debts such as your credit cards. Or use the money that you save on repayments to invest elsewhere to help grow your wealth. This could involve alternatives to cash such as buying shares or property. These carry their own pros and cons, so it’s a good idea to get advice so you understand the risks involved, and whether they are right for you.

It all depends on your situation and financial goals.

Like to know more?

You can jump straight onto our online extra repayments calculator.

Although shifts in interest rates affect most of us, why they move is not well understood. You can read more about why the RBA cut rates and what might happen next.

There’s also guidance if you’re thinking of paying off debt, buying property, increasing your saving and bumping up your super.

It could be the right time to talk to your financial adviser or find an adviser near you.

Subscribe to our newsletter

Important information

This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

All banking products are issued by AMP Bank Limited ABN 15 081 596 009, AFSL and Australian Credit Licence 234517.

All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.