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Fortnightly vs Monthly Home Loan Repayments – which is better?

Find out how you can save serious money by switching their mortgage repayments from monthly to fortnightly.

Updated

Changing your repayments from monthly to bi-monthly can make a massive difference in the amount of interest you pay and time spent paying your loan off.

Most lenders will calculate the fortnightly repayment rate by halving the monthly repayment rate, meaning you still pay the same amount each month but split it.

Because there are 26 fortnights in a year, this means you'll end up making an extra monthly payment each year, paying off more of your loan and freeing you from debt faster.

Try it out for yourself in the calculator below.

Say you have a loan of $300 000 charged at 6% over 30 years.Your monthly repayments would be $1798.65 with an annual repayment of $21 583.80.

If your lender calculates your 26 fortnightly repayments by halving your monthly repayments, you’ll pay $899.33 every second week for an annual total of $23 382.58. This equates to an extra payment of $1798.78 a year.

This means you’ll pay off your loan five years and six months earlier than normal and save a whopping $74 000 in interest.

There’s a catch though. Not every lender calculates repayments like this.

Glenn Braganza

Glenn Braganza

  • Glenn is the Chief Strategy Office of 1st Choice Financial, Concord, NSW.
  • Glenn specialises in mortgages, financial planning, self-managed super funds advice and mortgages and insurance for medical professionals.

Glenn Braganza from 1st Choice Financial in Sydney’s Inner West, says you should be aware of how lenders will calculate repayments before you change them to fortnightly.

‘Some banks will allow you to change your repayment frequency, but they’ll take your monthly repayment multiplied by 12 months and divided by 52 weeks. Then they’ll multiply this by two for fortnightly payments.’

About home loan repayment calculator

If a lender decides to calculate the repayment like this you’ll pay a lower amount each fortnight, putting you back at square one. In our example this would mean you’d pay $830.15 every fortnight rather than $899.33.

According to Braganza even if you change your repayments to ‘true’ weekly repayments, you can still save around $400 over the course of the loan.

‘The problem occurs when you ring up a lender, because some lenders by nature will calculate it their own way and there’s no two ways about it. So if you ring the Commonwealth Bank they’ll calculate it by halving the monthly repayments and do that. But some lenders will calculate a true fortnightly repayment,’ he says.

Check how your lender will calculate fortnightly repayments. If you start paying fortnightly, you could be in the fast lane to paying off your mortgage too.

To see how much your repayments would be normally, use our home loan repayment calculator.

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Loan purpose
Offset account
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $250,000 or more can get up to $3,000 cashback (Other terms, conditions and exclusions apply). A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I (*now 2.59%, drops to 2.54% on 30 Sep)
2.54%
2.46%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan. This rate will drop to 2.54% p.a on 30 September 2020 for new and existing customers. You can get this rate if you apply today.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.65%
2.66%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
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Disclaimer: It is advised that borrowers speak with a mortgage broker or accountant regarding their home loan structure and repayment frequency to ensure that it will suit their financial situation.
Image: Shutterstock

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Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I (*now 2.59%, drops to 2.54% on 30 Sep)
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I (*now 2.59%, drops to 2.54% on 30 Sep)

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan. This rate will drop to 2.54% p.a on 30 September 2020 for new and existing customers. You can get this rate if you apply today.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

Logo for HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)

Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.

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4 Responses

  1. Default Gravatar
    DanielMarch 16, 2017

    Just in regards to this. What if you had an offset account set up and you were able to place those fortnightly repayments into the account anyway for the repayments to then be taken out monthly ?

    • Avatarfinder Customer Care
      MarcMarch 23, 2017Staff

      Hey Daniel!

      Thanks for the question.

      The effect of fortnightly or bi-monthly repayments is to add an extra monthly repayment towards your home loan each year, so a similar effect might be able to be obtained by depositing similar extra amounts into an offset account. You might want to go through the sums with a mortgage broker, accountant or with your lender to find out exactly how it’ll affect your loan term.

      I hope this helps,
      Marc.

  2. Default Gravatar
    DeniseJune 25, 2015

    Should I be paying a fixed loan differently? Currently it is being paid weekly.

    • Default Gravatar
      JodieJune 25, 2015

      Hi Denise,

      Thank you for contacting finder.com.au, a financial comparison website.

      Each individual’s specific circumstances and needs are different and they should pay off their loan in a way that suits them, you can use the calculator on this page to see how changing the repayment frequency of your loan will affect your circumstances.

      If you want further advice I would recommend speaking to a mortgage broker, financial advisor or your lender directly.

      Regards
      Jodie

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