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A single lump sum payment on your mortgage can have a surprisingly large impact because it immediately reduces your principal, meaning every future repayment has a larger portion going toward further principal reduction.Example: A $20,000 lump sum in year 1 of a $600,000 loan at
At current rates (6.22%), putting a lump sum into the mortgage provides an effective 6.22% tax-free return. Unless you're confident your investments will consistently beat that after tax, the mortgage is generally the more predictable choice.
If your loan has a redraw facility, yes — but check for minimum amounts and fees. If flexibility matters, put the money in an offset account instead, which gives the same interest savings with instant access.
In theory, the lump sum saves slightly more because it reduces the balance immediately. In practice, the difference is minimal if you spread the same amount over 12 months. The important thing is to do it — don't let perfect be the enemy of good.
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