Fortnightly vs Monthly Home Loan Repayments – which is better?

Find out how two newlyweds saved $70,000 by switching their mortgage repayments from monthly to fortnightly.

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When newlyweds Rob and Elisa bought their first home they made use of a loophole which is saving them tens of thousands of dollars in interest and shaving years off their loan.

The way it works is simple: switch your repayments from monthly to fortnightly.

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.

Rob says it’s just common sense.

‘The quicker you can pay down the debt, the less you pay in interest down the track and when you discount that forward, it’s definitely worthwhile to pay things down as quick as you can.’

‘I think that’s one of the first things everyone tells you - to pay your mortgage fortnightly,’ he said.

Putting it into practice - How can fortnightly repayments save you money?

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.

Like Rob and Elisa, many first home buyers and even those buying their second or third home are paying more often to make the most of this loophole and pay off their home loans sooner.

‘The aim of the game is to pay down the debt and to build equity if you can by renovating, turning it over and making a profit that way, as opposed to relying on capital growth which is what people have been able to do more recently,’ Rob says.

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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Rates last updated November 20th, 2019
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Loan purpose
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
2.84%
2.84%
$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.
2.88%
2.90%
$0
$0 p.a.
80%
Get one of the lowest variable interest rates on the market and pay 0 application or ongoing fees.
2.89%
2.93%
$600
$10 monthly ($120 p.a.)
80%
A competitive variable rate for home buyers with a 20% deposit. This product has a 100% offset account.
2.89%
3.31%
$0
$10 monthly ($120 p.a.)
80%
Buy your home and lock in a low rate for the first two years. Available with a 10% deposit. Earn Velocity Frequent Flyer Points at settlement, monthly and every three years, plus extra bonus points for a limited time.
2.90%
2.92%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.13%
3.19%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
2.79%
3.82%
$0
$0 p.a.
90%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.
2.84%
3.42%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online.
3.19%
3.21%
$0
$0 p.a.
80%
A competitive variable investor rate for borrowers with 20% deposits. Low fees, redraw facilities and repayment flexibility.
2.95%
2.99%
$500
$0 p.a.
95%
This mortgage combines a very sharp interest rate with a 100% offset account and it's available with a 5% deposit.
2.79%
2.83%
$600
$10 monthly ($120 p.a.)
70%
A very low variable interest rate for home buyers with a 30% deposit. This product has a 100% offset account.
3.03%
3.06%
$0
$0 p.a.
80%
This low, variable rate loan has no ongoing fees and a redraw facility. Requires a 20% deposit.
3.09%
3.09%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.
2.69%
3.19%
$395
$0 p.a.
80%
A competitive fixed interest rate product with no ongoing bank fees.
3.18%
3.32%
$0
$10 monthly ($120 p.a.)
80%
This flexible, competitive variable rate mortgage comes with a redraw facility. Eligible borrowers can earn Velocity Frequent Flyer Points, plus extra bonus points for a limited time.
3.31%
3.32%
$500 (if over 80% LVR)
$0 p.a.
80%
A competitive variable mortgage for home buyers. This loan has flexible repayments and an optional redraw facility.
3.08%
3.42%
$0
$299 p.a.
80%
Get a 100% offset account and a competitive, variable interest rate, plus no application fee.
3.19%
3.19%
$0
$0 p.a.
80%
Pay no application and ongoing fees and take advantage of split and redraw options.
3.09%
4.63%
$500
$0 p.a.
95%
Home buyers can lock in their rate for two years while still enjoying flexible repayment options. Available with a 5% deposit.
3.24%
3.24%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
2.89%
3.29%
$0
$10 monthly ($120 p.a.)
80%
A competitive fixed rate mortgage available with a 10% deposit. Earn Velocity Frequent Flyer Points at settlement, monthly and every three years, plus extra bonus points for a limited time.
3.29%
4.70%
$500
$8 p.a.
95%
A flexible fixed rate loan for property investors. Borrow up to 95%.
3.24%
4.14%
$600
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
3.15%
3.56%
$0
$395 p.a.
80%
A low rate variable mortgage for home buyers. Comes with a 100% offset account and has no application fee.
3.20%
3.25%
$600
$0 p.a.
90%
Competitive variable rate mortgage with a partial offset account. Get this loan with a 10% deposit.
3.54%
4.44%
$600
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
2.74%
3.38%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
3.20%
3.22%
$0
$0 p.a.
90%
Save on interest with a free 100% offset account and buy your property with just a 10% deposit.
3.29%
3.91%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
3.65%
3.66%
$500 (if over 80% LVR)
$0 p.a.
80%
A variable investment mortgage with flexible repayments and an optional redraw facility.
3.40%
3.41%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
3.74%
3.76%
$0
$10 monthly ($120 p.a.)
80%
A variable rate home loan with no application fees and the opportunity to earn Velocity points.
3.59%
3.37%
$375
$15 monthly ($180 p.a.)
80%
Home buyers with a 20% deposit can get this low interest-only rate. It also comes with a 100% offset account.
2.84%
3.59%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
3.84%
4.16%
$0
$299 p.a.
80%
Get a 100% offset account, access to a redraw facility and a competitive rate tied to your LVR.

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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.
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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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