Dollar Saver Tip #25
Make fortnightly mortgage repayments instead of monthly repayments.
Richard here, Finder's home loans expert and proud — okay, struggling! — homeowner.
Like most Australians with a mortgage, my repayments have risen month after month as the Reserve Bank has lifted interest rates.
A quick trick to reduce your interest charges over time is to switch from monthly to fortnightly repayments.
Did you know?
Finder research shows 1 in 8 Australians have missed a mortgage repayment in the last 6 months.
There are 12 months in a year, so 12 monthly repayments. But there are 26 fortnights in a year.
By making fortnightly repayments you sneak in an extra monthly repayment a year. Over the life of your home loan this adds up, because the faster you repay the loan the less interest you're charged.
The average new Australian home loan is $601,252 according to the ABS. Assuming a 30-year loan term and a fairly standard (for today) 5.00% interest rate, here's what your repayments would look like:
- Your monthly repayments = $3,288
- Total interest over 30 years = $560,703
But what if you switched to fortnightly repayments?
- Your fortnightly repayments = $1,614
- Total interest over 30 years = $457,503
You'd save $103,200 in interest payments – $3,440 a year.
Just make sure your lender is calculating true fortnightly repayments rather than simply dividing up the monthly repayments. Use our fortnightly home loan calculator and try it for yourself.