Mortgage Freedom Early: The Fortnightly Repayments Hack
Switching your home loan repayments from monthly to fortnightly is one of the easiest ways to pay off your mortgage early in Australia. Here is how it works.
How, you might say? I don’t have extra money just lying around to stash into my home loan. Well, this simple mortgage hack surprised me, and it takes just a few minutes to set up with your bank.
Switch to fortnightly repayments instead of monthly. That’s it! If you're looking for strategies to reduce home loan interest, this one is an absolute no-brainer that can shave years off your mortgage.
For example, on a $500,000 mortgage at 6% over 30 years, switching to fortnightly repayments could save you $124,060 in interest and pay off your mortgage 5 years and 6 months early!
Why Fortnightly Repayments Work
“OK Baldy man, so how does this help me unchain from the shackles of my mortgage?” I hear you say.
When comparing weekly vs fortnightly vs monthly mortgage repayments, changing your frequency benefits you in two key ways:
- You make your repayments work harder against daily interest.
- You stretch time to squeeze in an extra home loan repayment every year.
Let's look at how this works under the hood:
1. You beat the daily interest cycle
In Australia, home loan interest is calculated daily and charged monthly. The sooner money hits your mortgage account, the lower your daily balance, and the less interest you accumulate.
Rather than letting interest compile over a whole month, making half-payments every two weeks reduces your loan balance earlier in the month, saving you cash over the long run.
2. The 13-month calendar hack
There are 12 months in a year, which means 12 monthly payments.
But there are 26 fortnights in a year. If you pay half your monthly amount every fortnight, you will make 26 half-payments. That equals 13 full monthly repayments in a year! By doing nothing more than restructuring your payment cycle, you've made an entire extra month's repayment without even noticing. This makes a massive compounding difference over a 30-year term.
Ready to see the savings? Use a fortnightly mortgage repayment calculator in Australia to see how much you can save:
