Understanding your home loan repayment schedule: Is weekly, fortnightly or monthly best?
Understand how weekly, fortnightly or monthly home loan repayments work, and which one could help you save interest and pay off your loan faster. Learn what’s right for you with this simple guide.
Did you know that deciding how often you make your home loan repayments could make a big difference over time?
You can choose to repay your home loan in weekly, fortnightly or monthly instalments - and each option has its own set of benefits and potential drawbacks.
To help you figure out which repayment schedule will work best for you, we’ve put together a handy breakdown of the advantages and disadvantages of each type, so you can make an informed choice.
Option One: Weekly repayments
These are the advantages of opting for weekly repayments:
Pay less interest overtime
Interest on your home loan is usually calculated on a daily basis. This means that by making more frequent payments- such as weekly rather than monthly - you can save on interest costs.
Easier for weekly pay cycles
f you get paid every week, weekly repayments can help you keep on track with your expenses and align your repayments with your pay cycle.
Shorten your loan term
Making more frequent repayments can help you reduce your overall home loan amount faster. This means you’ll be able to pay off your home loan more quickly.
These are the disadvantages of opting for weekly repayments:
A more regular commitment
Committing to weekly home loan repayments means you’ll have to regularly monitor your finances and make sure you always have the funds available for your weekly repayments.
Not a huge difference vs. fortnightly repayments
While paying weekly can reduce your interest compared to a monthly schedule, there’s often not a significant difference in the interest reduction between weekly and fortnightly repayments.
More complex budgeting
If you choose to pay off your home loan in weekly instalments, keep in mind that budgeting can become a little more complicated, especially if most of your other expenses operate on a monthly schedule.
Option Two: Fortnightly repayments
These are the advantages of opting for fortnightly repayments:
Make on full extra payment per year
By opting for fortnightly repayments, you effectively make 26 half-payments in a year, which is equivalent to 13 full monthly payments. This occurs because a year has 52 weeks, and by paying every two weeks, you make one extra month's payment over the year compared to the 12 payments you would make if you were paying monthly.
This system leverages the way weeks are distributed across months, which may have 28/29, 30, or 31 days, but always have 4 or more weeks. By making this one full additional payment annually, you can reduce the overall term of your loan and the amount of interest you pay over the life of the loan.
Sync payments with your pay cycle
Get paid fortnightly? Then making fortnightly repayments could be an ideal way to align your home loan repayment schedule with your cash flow.
Save on interest
Similar to weekly repayments, paying fortnightly can decrease the total amount of interest you’ll pay over the life of your loan.
These are the disadvantages of opting for fortnightly repayments:
Budgeting can be a challenge
If you’re used to basing your budget on monthly expenses, switching to a fortnightly home loan repayment schedule could prove to be a little complex.
An extra payment to allow for
While that extra payment per year can be helpful in some ways, it also means you’ll have to make sure your finances can stretch to a full additional payment every 12 months.
You might not save as much as you expect
Depending on whether your interest is calculated on a daily or monthly basis, paying your home loan in fortnightly instalments may not offer you as much of a cost-saving benefit as you were hoping for. Be sure to check the maths before going ahead.
Option Three: Monthly repayments
These are the advantages of opting for monthly repayments:
A more convenient schedule
Making one home loan repayment every month can be a super simple way to align your schedule with your regular household expenses.
Ideal for monthly pay cycles
If you receive your wages on a monthly basis, paying your home loan in monthly instalments can make it nice and easy to manage your repayments.
Less strain on your cash flow
By making payments less frequently compared to a weekly or fortnightly schedule, monthly home loan repayments can put less pressure on your monthly cash flow.
These are the disadvantages of opting for monthly repayments:
More interest over time
Paying your home loan in less frequent instalments can often mean you’ll end up paying more interest over the life of your loan.
A longer loan term
Monthly home loan repayments generally result in a longer timeframe to pay off your mortgage completely.
Less flexibility
If you get paid weekly or fortnightly, opting for a monthly home loan repayment schedule might give you less flexibility than more frequent repayment options.
So, which home loan repayment schedule is right for you?
The choice between weekly, fortnightly and monthly home loan repayments will depend on all kinds of factors. From your income flow to your spending habits, your budgeting style and your long-term financial goals, there’s lots to consider when it comes to selecting a repayment plan.
If saving on interest and paying off your loan as quickly as possible is what you’re after, then amore frequent repayment schedule potentially may suit your situation.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
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*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
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Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
