Tax return season is here. And for homeowners, it’s worth pausing before that money gets absorbed by groceries, bills, or a purchase you’ll barely remember in six months.

This isn’t about telling you what to do with it. Everyone’s situation is different and there are plenty of valid ways to use a tax return. But if you’ve never stopped to consider what even a portion of it could do for your home loan, the numbers might surprise you.

Here’s an example worth looking at.

The average Australian tax refund sits between $2,000 and $3,000 per person (Odintax). For households with two incomes, that figure could be significantly higher. So let’s use $2,500, a realistic figure, and see what happens when that amount gets put toward a home loan once a year.

• Loan amount: $600,000
• Interest rate: 6.20% per annum
• Loan term: 30 years
• Standard monthly repayment: $3,674.81
• Extra repayment: $2,500 once per year as a lump sum

These figures are illustrative only. Your actual results will depend on your loan balance, interest rate, repayment frequency and lender conditions.

The result

Why does $64,000 in extra repayments save $112,000?

This is the part most people find surprising.

The $112,000 is not the extra money paid in. It’s the interest the bank no longer receives.

Every extra dollar put into a loan reduces the outstanding balance. And because interest is calculated daily on most loans, a lower balance means less interest charged for the remaining life of the loan.

The benefit compounds quietly over time. The earlier the extra repayments start, the greater the impact.

How the numbers build year by year

Balances shown are end of year figures. The total interest saving of ~$112,000 reflects the interest that would have continued accruing on the original loan through to year 30, even though the loan with extra repayments is fully paid off at year 26.

Before you decide, a few things worth knowing

Putting a tax return toward your home loan isn’t automatically the right move for everyone. A few things worth considering first:

• Does your loan allow extra repayments without penalty? Most variable rate loans do. Some fixed rate loans have caps on extra repayments, so it’s worth checking with your broker before you act.
• Do you have an offset account? Funds sitting in an offset account work similarly to extra repayments in reducing the interest you’re charged, while keeping the money accessible.
• Are there higher-interest debts that should come first? Credit cards and personal loans typically carry higher rates than a home loan. The order in which you tackle debt matters.
• Do you have an emergency fund? If you have a redraw facility or offset account, extra repayments can work double duty. The money reduces your interest while still being accessible if you need it, which is often a smarter position than keeping a separate emergency fund in a low-interest savings account.

The right decision depends on your full financial picture, not just the loan in isolation.

Not sure what makes sense for your situation?

That’s exactly the kind of conversation Rebecca is here to have. Whether you’re thinking about making extra repayments, reviewing your loan structure, or just want to understand your options better, there’s no obligation and the numbers might surprise you.

See what extra repayments could do for your loan.

Run your own numbers below.

This article is general in nature and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation or needs. Before making any financial decisions, you should consider whether this information is appropriate for you and seek independent professional advice. Rayne Finance (Seed Lending Pty Ltd ACN 605 100 838) is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192.