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 fortnightlyyoung couple sold 300px. We show you how to save some big bucks on your home loan by switching your repayment frequency to fortnightly.

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.

Compare your mortgage options today

Rates last updated October 21st, 2018
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.57%
3.58%
$0
$0 p.a.
80%
Get a very low interest rate and pay fewer fees. Enjoy a fast online application process and add a 100% offset account for $10 a month.
3.59%
3.59%
$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.
3.59%
3.61%
$0
$0 p.a.
90%
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3.64%
3.66%
$0
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80%
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3.69%
3.73%
$600
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A home loan with no ongoing fee and a redraw facility that you can borrow up to 95% LVR.
3.59%
3.62%
$0
$350 p.a.
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Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.68%
3.82%
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$10 monthly ($120 p.a.)
80%
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3.54%
3.57%
$0
$0 p.a.
80%
A competitive variable essentials interest rate product aimed at refinancers looking to switch to a lower rate.
3.87%
3.91%
$0
$10 monthly ($120 p.a.)
90%
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3.54%
3.58%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility. $900 cashback offer.
3.64%
3.64%
$0
$0 p.a.
70%
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3.69%
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3.68%
3.70%
$0
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3.74%
3.74%
$0
$0 p.a.
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3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.68%
3.70%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.79%
3.80%
$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.
3.84%
3.85%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn double Velocity Frequent Flyer Points on your mortgage for a limited time (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.75%
3.75%
$0
$0 p.a.
70%
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3.79%
3.82%
$0
$0 p.a.
80%
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3.74%
4.13%
$0
$349 p.a.
90%
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3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.69%
4.12%
$0
$395 p.a.
80%
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3.67%
3.69%
$0
$0 p.a.
80%
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3.70%
3.70%
$0
$0 p.a.
70%
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3.80%
3.80%
$0
$0 p.a.
70%
Earn tens of thousands of Qantas Points or more with this variable owner occupier mortgage. Requires a 30% deposit.
3.64%
3.64%
$0
$0 p.a.
70%
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3.84%
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$0
$0 p.a.
80%
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3.64%
3.59%
$0
$0 p.a.
80%
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3.99%
3.92%
$0
$10 monthly ($120 p.a.)
90%
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3.85%
3.85%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
3.71%
3.71%
$0
$0 p.a.
70%
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3.72%
4.10%
$0
$395 p.a.
80%
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3.59%
3.58%
$0
$0 p.a.
80%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for a small fee.
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features. This product comes with a 100% offset account.
3.89%
3.91%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
4.17%
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$0 p.a.
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Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
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3.84%
3.82%
$0
$0 p.a.
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A fixed rate loan with free redraws, few ongoing fees. Apply online with a fast approval process.
3.69%
4.08%
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4.75%
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$10 monthly ($120 p.a.)
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$0 p.a.
110%
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4.04%
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90%
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3.59%
4.14%
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3.99%
5.35%
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$0 p.a.
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4.31%
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4.29%
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3.74%
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$0
$0 p.a.
80%
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4.18%
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$0 p.a.
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3.94%
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$595
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$0
$0 p.a.
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4.29%
4.26%
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$0 p.a.
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4.14%
3.96%
$0
$0 p.a.
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4.14%
4.81%
$0
$0 p.a.
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3.84%
3.91%
$0
$0 p.a.
80%
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3.99%
3.99%
$0
$0 p.a.
80%
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3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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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.

Marc Terrano

Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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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 ?

    • finder 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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