Most people make their mortgage repayments monthly, but what if paying weekly or fortnightly could help you save money?
A year has 12 months, 26 fortnights, and 52 weeks. Paying weekly or fortnightly can help you make an extra repayment each year compared to paying monthly.
The more frequently you make repayments, the less interest will be accrued on what you still owe. Let's take a look at an example:
Loan amount: $400,000
Monthly repayment: $2500
If you made a monthly payment of $2500, then you will be accruing interest on $400,000 for the entire month. However, if you make two fortnightly payments of $1250, then you will only be accruing interest on $398,750 for half the month.
If you continue with this strategy, you can save a significant amount of money in interest payments and reduce the time it takes to pay off your home loan. Use this repayment calculator to see how much time and money you can save by switching your repayment frequency to weekly or fortnightly.
This home loan repayments calculator works like a standard mortgage payments calculator, except that it also simulates the effect of making weekly or fortnightly payments. Just enter the basic details of your loan, including loan amount, loan term, and interest rate, and your results will generate automatically.
The loan balance chart graphs how much time and money can be saved by making fortnightly rather than monthly payments.
This home loan repayments calculator is designed to give you an estimate of what you can save by switching your repayment frequency from monthly to fortnightly or weekly and works on a series of assumptions, including:
A calculator can't give you a precise answer because of the variance between lenders and how they calculate home loan repayments. Therefore, you should only use this mortgage repayments calculator to get an indication of how switching your repayment frequency will impact your home loan.
This calculator is based on the Half Monthly Repayment Method, which calculates weekly and fortnightly payments as 1/4 and 1/2 of monthly payments, respectively. Using this method, you will make extra repayments over a 12-month period, pay back your home loan sooner, and save money on interest payments.
If your lender charges fortnightly payments as your annual repayments divided by 26 fortnights, then you won't end up paying as much extra by switching your repayment frequency. While you will still save money on interest, it won't be as much, and it will take the same amount of time to pay off your home loan in full.
The Half Monthly Repayment Method is most effective if your lender calculates fortnightly payments as half your monthly payment. If your fortnightly payments are calculated as annual payments divided by 26, then you won't save as much time or money with this method.