How can I reduce the total interest I pay on my home loan?

Reducing the total interest paid on your home loan can save you hundreds of thousands of dollars over the life of the mortgage. Several proven strategies can help you minimise this cost.

Securing the lowest possible interest rate is the most direct approach. Compare rates across multiple banks, negotiate where possible, and consider using a mortgage advisory service like Cashew to access the full range of available packages. Even a 0.25% reduction on a S$800,000 loan over 25 years saves approximately S$30,000 to S$40,000 in total interest.

Choosing a shorter loan tenure, if your cash flow permits, dramatically reduces total interest. A S$600,000 loan at 3% over 20 years costs approximately S$199,000 in total interest, while the same loan over 30 years costs approximately S$310,000 - a difference of over S$110,000.

Making partial prepayments accelerates principal reduction and cuts total interest. Directing windfall income such as annual bonuses, tax refunds, or investment proceeds toward your mortgage can shave years off your loan and save significant interest. Even modest additional monthly payments make a meaningful difference over time.

Refinancing or repricing when better rates become available ensures you are not overpaying relative to the market. Actively monitoring your loan terms against current offerings, especially after your lock-in period expires, is essential.

Using a combination of CPF and cash strategically can also impact total costs. While using CPF saves your cash in the short term, the 2.5% accrued interest requirement means there is an implicit cost. For some borrowers, using more cash for the mortgage and preserving CPF may result in a better overall financial outcome.

Opting for a floating-rate package can save money over the long term if rates remain relatively low, though this comes with the trade-off of payment variability. Historically, floating rates have been lower than fixed rates on average over extended periods.

Paying your mortgage fortnightly instead of monthly is a technique some banks support. Because there are 26 fortnightly periods in a year (equivalent to 13 monthly payments), you effectively make one additional monthly payment per year, which reduces the principal faster.

Cashew can model all of these strategies for your specific loan to quantify the potential savings and recommend the most effective combination.