Home Loan Repayments: Monthly versus weekly

Home Loan Repayments: Monthly versus weekly

Have you ever considered the frequency with which you pay off your home loan? Most people choose to line up their home loan repayments with their pay check and it is a relatively smart idea, but you could be paying off more on your home loan every year if you switched to paying on a fortnightly or weekly basis, and it doesn’t have to put a major strain on your budget.

Let me show you how. Repaying $1000 a month comes to the equivalent of $12,000 a year on your home loan. If you changed to repayments of $500 every fortnight, over the year you’d actually payback $13,000 because there are 26 fortnights in a year. That’s one whole extra month off your mortgage. Because interest on home loans is usually calculated daily, by increasing repayments not only are you paying back the full amount of your home a lot faster, you’re also reducing the amount of interest you’ll accrue over the lifetime of the mortgage.

So how much could you save over the life of a home loan?
To put it in a more relative perspective let’s look at a standard $330,000 home loan with a variable interest rate of 6.23% over 30 years. Monthly repayments on this loan would be $2028, and you would pay a total interest of $399,635 over the lifetime of the loan. Switching over to fortnightly payments of $1014 a fortnight, you would pay a total interest of $306,731, a saving of roughly $93,000 over 30 years. That’s ninety three thousand dollars incase you think your eyes are playing tricks on you! And the savings look even better if you can make weekly repayments (see below).

If you live in a typical Sydney or Melbourne suburb and your loan is more likely around $600,000, you could save closer to $167,000 by changing your repayment frequency from monthly to fortnightly.

Monthly vs fortnightly vs weekly home loan repayments:

$330,000 Mortgage Monthly Fortnightly Weekly
Repayments $2028 $1014 $507
Total Interest Paid $399,635 $306,731 $305,191
Total Interest Saved $0 $92,904 $94,444

Based on a 6.23% variable interest rate over 30 years
How to switch your repayment frequency
All you need to do is check that your bank offers fortnightly and weekly payments and that you won’t be penalised.

Okay, so now we’ve got repayment frequency cleared up, how about fixing up your interest rate (you could be doing a lot better than the standard 6.23% we used in the example). Why not give yourself a quick home loan health check and compare the best rates on the market?

Product data correct at the time of writing. 

Home Loan Repayments: Monthly versus weekly was last modified: July 26, 2016 by Kevin Boyle

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8 Comments - Write a Comment

  1. Hi

    I understand that if I pay fortnightly I make 26 payments instead of the 12 monthly ones.

    However, does it make any difference in savings if I pay more than the minimum each week / month (assuming no offset account etc)

    I have to pay $250 per week but pay $300 (total = 52 * $300 = $15,600).
    If I paid the same but monthly ($15,600 / 12 = $1,300)
    would I be:
    a) Worse off
    b) Better off
    c) The same?

    1. Mozo

      Hi David,

      In the example, you would be worse off repaying the same $15,600 yearly amount in monthly instalments than in weekly instalments because you are allowing more time for the loan balance to accrue interest.

      I hope this helps.

    1. Mozo

      Hi Stef,

      Yes, there would be a small difference. For example, if your weekly repayments were $700, if you decided to pay that as $100 per day then it would save a little bit of interest and you could pay off the loan sooner. This of course is only valid if the lender allows for daily repayments.

      If there is a 100% offset account and every cent you own is in it, then it doesn’t really matter if you have daily, weekly, fortnightly or monthly repayments anyway.

      We hope this helps,

      Mozo Team

  2. Hi,

    Wondering if we should change our monthly payments to fornightly. We have a 330,000 loan and have been a year into it. We have an offset account that all funds go into and we put extra payments into the loan directly when we can. Would forghtnightly payments change much for us for the better? Trying to get rid of the morgage sooner rather than later 🙂

    Thanks in advance!


    1. Mozo

      Hi Jessie,

      As long as you keep putting in lump sums from the offset account into the loan then you don’t need to change your repayments. You should just leave enough in the offset account for your expenses. The trick is not to redraw the extra money you put in the loan back out unless it’s for an emergency.

      Mozo team

  3. Hi

    We have $514,000 mortgage.

    Changing it from monthly to weekly, but just wanted to know how much saving would that be over the term of loan e.g 20 years.



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