Is it better to pay your mortgage weekly, fortnightly or monthly?

Most borrowers choose to pay monthly and don’t realise they have the option to make fortnightly or weekly mortgage repayments. But what if I told you that increasing your repayment frequency could save you thousands of dollars on your home loan?

Opting for weekly or fortnightly repayments instead of monthly doesn’t just affect the size of your mortgage repayments. Increasing your repayment frequency also affects how much interest you pay over time and, as a result, how quickly you pay off your loan.

This all comes down to a bit of simple maths. Because there are more fortnights and weeks in the year than months, you pay off your principal faster (albeit in smaller chunks). Interest accrues daily, so the more often you chip away at it, the less time interest has to accumulate.

For example, let’s say your monthly mortgage repayments cost $1,000, meaning you pay $12,000 per year. If you were to pay your mortgage fortnightly instead, and you paid $500 every two weeks, in one year you would have already paid $13,000.

Effectively, you could shave a whole month off your home loan with fortnightly vs monthly mortgage repayments. Imagine how much time and money you could save if you increased your repayment frequency throughout the whole of your mortgage.

How much you stand to save with different repayment frequencies depends on your home loan size, interest rate, term length, fees, features, and how soon into your mortgage you change to weekly or fortnightly repayments.

So, we’ll look at an example using the average mortgage size and average variable rate home loan in the Mozo database and compare the difference between paying your mortgage weekly or fortnightly vs paying monthly. 

The following calculations assume you opt for a different repayment frequency from day one, and that your variable rate doesn’t change over time.

Monthly repayments

A $626,055 home loan over 25 years, with an average variable rate of 6.80% p.a. (for OO, P&I, $400k, <80% LVR, as at 24 July 2024) will have monthly repayments of $4,345 and a total interest bill of $677,527. 

Paying mortgage fortnightly vs monthly

If you choose to pay for your mortgage in fortnightly instalments, you’ll save a lot more in interest than if you’d chosen monthly repayments. 

Switching over to fortnightly repayments of $2,173 will not only save you $138,280 in interest but allow you to pay off your home loan 4 years and 4 months early.

Paying mortgage weekly vs monthly

Paying for your mortgage weekly means you pay even less interest.

Choosing weekly repayments of $1,086 saves you slightly more in interest ($139,040) and helps you pay off your home loan 4 years and 5 months early.

Pay cycles 

Some people prefer to pay their mortgage monthly, due to their monthly pay cycles. If those people choose to pay on a weekly or fortnightly basis, they would have to ensure they budget appropriately and don’t run out of cash towards the end of the month.

Of course, this becomes less of an issue for those whose pay cycles sync up with weekly or fortnightly repayments. In their case, it might suit them better, highlighting why it’s important to consider your circumstances when making a big decision such as this. 

If you’re part-way through your home loan 

For those who have already started paying off their home loans, it can be as simple as contacting your home loan lender and requesting to change how often you make repayments. 

This can be done by calling your lender’s customer service team, managing your home loan through your lender’s app, or going through their online portal.

Before you start your home loan

It’s common for most lenders to offer different repayment frequencies on variable home loans, so it’s usually a matter of requesting a certain repayment frequency when you apply for a home loan.

Making mortgage repayments weekly is a great way to reduce interest over the long term, but there’s a lot more you can do to save interest on your home loan.

By taking advantage of home loan features like extra repayments and offset accounts, you might even be able to pay off your home loan early. 

Looking for more tips and hacks to save money on your home loan? Read through Mozo’s comprehensive home loan guides for everything you need to know about financing your next property.