Repaying a home loan more frequently can result in reducing your home loan term by years and saving you thousands in interest.
Are weekly or fortnightly mortgage repayments better than monthly?
Usually, both weekly and fortnightly repayments are better than monthly repayments. Since interest is calculated daily, the more frequent payments you make, the more you could save interest over the life of your loan and pay off your loan sooner.
You can take advantage of this if you can reduce the daily balance even by a minimal amount and you will save on both term and interest. So long as the total amount repaid over the month isn’t less than the minimum monthly repayments.
Generally speaking, mortgage loan repayments are quoted by lenders in months at x% over a 25 or 30-year term. This does not mean you have to pay monthly – but do you pay weekly or fortnightly?
Will I save more if my loan repayments are weekly vs. fortnightly?
There is only a small difference in interest saving if you pay weekly or fortnightly and there is no difference in the term saving, as demonstrated in the table below. Since 26 fortnights/52 weeks is the equivalent of 13 months, fortnightly or weekly payments can help you make an extra month’s worth of monthly repayments each year, without you even realizing it.
Weekly and fortnightly repayments can also allow you to synchronise your costs with your fortnightly or weekly income, making it easier for you to budget.
| Loan Amount: $860,000 Interest: 2.7% Loan Term: 30 years | Monthly | Fortnightly | Weekly |
| Repayments | $3,488.14 | $1,744.07 | $872.03 |
| Total Interest | $395,730 | $345,771 | $345,458 |
| Interest Saved | $0 | $49,959 | $50,272 |
| Time Saved | 0 | 3 years 5 months | 3 years 5 months |
Are there other ways to save on interest charges?
You could save further interest charges if your home loan is set up with an “offset account” which is a fully functioning transactional account which offsets against the interest on your home loan. Simply, your interest repayments are charged on your mortgage minus the offset amount.
Don’t forget, no matter your repayment frequency, you can always make extra repayments or save on interest by depositing spare cash into an offset account.
If you would like to change the frequency of loan repayments on your home loan, please call us on 89041176.