Should you pay off your mortgage early or go solar? A Perth comparison

One of the most common questions from Perth homeowners: "If I have $8,000 spare, should it go on the mortgage or on solar?"

The answer depends on your mortgage, your electricity usage, and how much weight you put on certainty. This guide compares the two in dollars, not percentages, and leaves the decision with you.

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The mortgage side: interest you no longer pay

An extra mortgage repayment lowers the balance that interest is charged on. The saving is easy to work out, and it holds for as long as your rate does.

Example at a 6.5% variable rate:

• Extra $8,000 paid off the mortgage = about $520 a year less interest
• The saving moves with your rate: if the rate changes, so does the saving
• The money is no longer in your pocket, though an offset account or redraw facility may let you get it back

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The solar side: a smaller power bill

Solar doesn't pay interest or earn a yield. It lowers your electricity bill in two ways:

• Self-consumption. Every kWh you use from your own panels is a kWh you don't buy from Synergy.
• Export credits. Power you send to the grid earns a credit under DEBS, at a much lower rate than you pay to import.

How many dollars that adds up to depends on your usage pattern, your roof, the system size and your tariff. That's why we don't quote a typical figure here: a number worked out for someone else's home tells you little about yours. The BillWise calculator estimates your yearly bill saving from your own bill, using the current Synergy tariffs and DEBS rates.

Once you have your estimate, the comparison is simple:

• Mortgage: how many dollars a year in interest does the extra repayment save?
• Solar: how many dollars a year does the calculator estimate you'd save on power, and what does the system cost?

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Why the dollar comparison isn't the whole story

The mortgage saving is fixed; the solar saving is an estimate

The interest saving follows your rate. The solar saving depends on:

• Your actual consumption compared with what the system generates
• Future electricity prices, which nobody can promise
• Panel degradation, which is gradual but real
• Whether your habits change after installation, such as running appliances in the middle of the day

Solar doesn't reduce your mortgage balance

Paying off the mortgage reduces what you owe. If you sell, a lower balance means more equity. Solar may add to a home's appeal to buyers, but any effect on sale price depends on the market and isn't guaranteed.

You might be able to do both

Some households finance the system with a solar or green loan and keep their cash in the offset account. Whether that works for you depends on the loan's interest cost compared with the bill saving your calculator estimate shows. Our solar financing guide sets out the options.

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Questions that decide it

Solar tends to suit households that:

• Use a lot of power during the day, so more of the generation is used at home
• Plan to stay in the home for several years
• Are on, or considering, the Midday Saver plan

Extra mortgage repayments tend to suit households that:

• Use little electricity (a small household, often away)
• Are carrying a high mortgage rate
• Plan to sell within a few years
• Have a roof that limits the system size

Doing both can suit households that:

• Can get a low-cost solar or green loan
• Would still hold an emergency buffer in their offset account after paying for solar

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What about batteries?

A battery adds a second, larger cost to the solar side of the comparison. Its bill saving comes from storing daytime solar for evening use, so it depends heavily on your evening consumption and your tariff. Run the calculator with and without a battery to see the difference for your home, and read our battery payback guide for what drives it.

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Electricity prices: the part nobody can fix in advance

The mortgage saving follows your interest rate. The solar saving follows electricity prices: when Synergy's prices rise, each kWh you don't buy is worth more, and when they hold steady, it isn't. Our Synergy price history shows how prices have moved in the past, but past rises don't guarantee future ones.

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The mortgage example uses a 6.5% variable rate for illustration only. Solar savings vary by household; use the calculator for an estimate based on your own bill. This article is general information, not financial advice. For decisions involving significant sums, talk to a licensed financial adviser.