How-much-can-I-save-by-switching-to-fortnightly-repayments-

How to make the most of refinance home loan features to save money

Saving on a home loan can happen in many ways when refinancing

Refinancing can come with many saving opportunities such as lower interest rates, shorter loan terms or money-saving features such as the ability to make fortnightly repayments, unlimited additional repayments and 100% offset accounts.

When comparing refinance loans, it's important to find a mortgage with a competitive rate and useful features that will help you lower your periodic repayments and better manage your loan to suit your needs.

To illustrate, if you had a home loan of $400,000 with 6.30% interest and you refinanced to a lender that offered 5.30% interest- just 1% lower- you would save around $242 each month in interest. This would lead to a staggering $72,675 saving over the life of your mortgage.

To discover how much you could save switching to a cheaper interest rate, use our free home loan comparison calculator.

Read on to learn more about the features you should consider when refinancing.

How much can I save by switching to fortnightly repayments?

Some home loan knowledge can go a long way in helping you save interest and pocket the savings. Industry insiders know that interest on a home loan is calculated daily. As a result, choosing weekly or fortnightly repayment schedule instead of a monthly repayment schedule can save you interest.

If you pay a home loan fortnightly instead of monthly, your remaining loan amount will reduce twice a month. For the second fortnight of the month, interest will be calculated on a lesser loan amount than if repayments were made monthly. Therefore, more frequent home loan repayments equals less interest over the life of the loan.

When you make fortnightly repayments, more repayments are made in total which means it's the equivalent of making additional repayments compared to a monthly repayment plan.

Tahlia opts for a fortnightly repayment plan

mortgage broker After comparing different home loan options, Tahlia and her husband realise that they could net significant savings by refinancing to a lender that allows them to make fortnightly repayments instead of monthly repayments. On her $550,000 home loan at 4.5% interest, their monthly repayments are $2,786 and total amount repayable is $1,003,236 over 30 years.

However, after doing some research and speaking with a mortgage broker, Tahlia and her husband find a lender that not only offers a more competitive rate but also allows them to make fortnightly repayments. From doing some quick calculations, Tahlia realises that if she repays her loan on a fortnightly basis, her repayments will be just $1,393 and total amount repayable would be $926,144.

This amounts to a saving of $77,092 over the life of the loan.

After calculating the costs of refinancing, Tahlia and her husband decide to refinance in order to reap the cost savings from the repayment flexibility and more competitive features offered by the new lender.

Note that for this strategy to work your repayment must be the monthly repayment halved and paid every two weeks.

Want an idea of refinancing rates? Look at our comparison table" limit

Rates last updated July 17th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.64%
3.66%
$0
$0 p.a.
80%
Pay no ongoing fees and enjoy a flexible repayment schedule, including the ability to make unlimited additional repayments without penalty.
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. Get $1,000 cash into a USaver account when you take out a loan of $200,000 or more (new or refinance). Terms and conditions apply.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.49%
4.49%
$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.
3.52%
3.53%
$0
$0 p.a.
80%
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.75%
3.75%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.69%
3.69%
$445
$0 p.a.
90%
Get a special discount for a limited time when you open an IMB Transaction Account. Face-to-face consultations available in NSW and ACT.
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
3.59%
3.74%
$0
$10 monthly ($120 p.a.)
70%
Low-rate loan with 100% offset account for owner occupiers. You need a 30% deposit to get this mortgage.
3.54%
3.58%
$0
$0 p.a.
80%
Eligible borrowers can get $900 cashback on this loan with a 100% offset account and a redraw facility.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Let the mortgage experts at Aussie do the hard work for you. Speak to a broker about this competitive home loan and compare many other offers from across the market.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.75%
4.00%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.64%
3.67%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.69%
3.70%
$0
$0 p.a.
90%
Package your loan and get an interest rate discount, a 100% offset account and help from an HSBC relationship manager.
3.64%
3.64%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.79%
3.79%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.78%
3.78%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.79%
3.79%
$0
$0 p.a.
95%
For refinancers only. Switch to this special refinance mortgage. $600 application fee and other set up costs waived. 5% deposit option available.
3.74%
3.79%
$600
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.85%
3.85%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.59%
3.59%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Get $1,000 cash into a USaver account when you take out a loan of $200,000 or more (new or refinance). Terms and conditions apply.
3.64%
3.69%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.72%
4.11%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.79%
3.83%
$600
$0 p.a.
80%
A low interest rate loan with limited fees and a redraw facility. Principal and interest repayments only.
4.19%
3.78%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
4.09%
4.12%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.99%
3.74%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.84%
3.89%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.89%
3.92%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.94%
3.71%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
4.05%
4.10%
$445
$0 p.a.
90%
Buy a home with just a 10% deposit with this variable rate loan. Face-to-face consultations available for NSW and ACT customers.
3.69%
4.47%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
3.97%
3.97%
$0
$0 p.a.
90%
A variable rate loan with a 100% offset account. Available with a 10% deposit.Face-to-face consultations available for NSW and ACT customers.
3.89%
4.87%
$595
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
4.19%
4.19%
$0
$0 p.a.
90%
100% offset account, unrestricted additional repayments and no monthly account keeping fees
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.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
4.09%
4.12%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
4.09%
4.11%
$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.
3.59%
4.42%
$600
$0 p.a.
95%
Get a 1% discount for the first two years of your loan and pay no application or ongoing fees.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.99%
3.99%
$0
$0 p.a.
80%
Get special offers on a Visa Platinum card, transaction accounts and insurance with this package loan.

Compare up to 4 providers

How much can I save by making extra repayments?

If you're thinking of refinancing your home loan to a new lender, one feature to consider is the ability to make additional repayments. Making additional repayments towards your mortgage can help you reduce the amount of interest you'll pay over the life of the loan and thereby reduce your loan term.

While it may be difficult to get into a habit of making regular extra repayments and to practice the financial discipline involved with using this feature, it pays to find a mortgage that will allow you to make unlimited additional repayments. However, if interest rates drop, this may be a good time to make extra repayments as you'll have lower monthly repayments.

When comparing different refinance home loans, consider switching to a lender that allows you to make extra repayments as this can lead to significant cost savings.

For instance, if you had a loan of $400,000 at 5.0% interest and you started making extra monthly repayments of $100 after 5 years of having your mortgage, you would save a total of $26,604.55 and you would reduce your loan term by 2 years and 1 month.

How much can I save by using a 100% offset account?

Paying money into a 100% offset account has the same effect as making additional repayments towards your mortgage — except with the useful advantage of being able to withdraw the funds at any time.

Money deposited into a 100% offset account reduces the outstanding loan amount for the purposes of interest calculation. An offset balance of $10,000 on a $400,000 home loan means that interest is only calculated on $390,000 ($400,000-$10,000). Keeping $10,000 in an offset account could save $16,000 over the life of the loan; and even more so if regular contributions are made to the offset account.

As offset accounts are linked to a home loan, borrowers will usually receive their salary in that account, which will help reduce interest on their mortgage from the day they are credited their pay. It is a great 'set and forget' feature to work away at reducing the amount of interest you pay over the life of the loan.

When should you consider refinancing?

refinance home loanIf considered carefully, there are many times when refinancing can make financial sense.

Although you may feel content with your current home loan, you may want to switch to a new lender to take advantage of a lower rate or more suitable features.

Here are some ways that refinancing can be useful:

  • To save money. An opportunity to save money is a great reason to refinance. This can be done by refinancing to a cheaper interest rate or by refinancing to a home loan that has features that enable you to save interest, such as 100% offset accounts and unlimited additional repayments.
  • Debt consolidation. You may also consider refinancing if you've incurred lots of consumer debt that eats heavily into the household budget. One of the more common reasons for refinancing a home loan includes consolidating car loans, personal loans and credit card debts. The interest rates on the mortgage are substantially cheaper than interest rates charged on other short-term debt. Therefore, you can save on interest if you refinance for debt consolidation. However, keep in mind that if you refinance for this reason you should make an effort to make additional repayments so that you're not paying short-term debt over an extended loan term.
  • Renovation. Another reason for refinancing your home is to raise cash to complete home renovations. Larger renovations, such as refitting kitchens or bathrooms or adding new rooms to the home, are often expensive. Refinancing the mortgage to cover the cost of these things can help you access funds to complete your renovation project.
  • Property investment. There are also people who choose to refinance for property investment. Those people raise a deposit from the equity in their own home to put towards purchasing an investment property.

Marc Terrano

Marc Terrano is a content marketer manager 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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Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

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