Do fortnightly repayments really make your mortgage shrink?


Do you have a principle and interest home loan? interest-rate-300x225

Well if so read on as this tip could save you a fortune over the years.

It’s a method to best manage your home loan repayments in order to save not only interest, but years on the life of a standard, variable rate home loan.

While most borrowers just go with the flow and hand over their hard earned cash to the banks on a monthly basis, many financial planners suggest that making fortnightly repayments on your mortgage can save money and decrease your loan period by years.

So exactly how does this work? 

Basically, by halving your monthly repayment and paying this amount every fortnight, you end up making 26 rather than 12 repayments per annum, which is the equivalent of one extra monthly repayment every year on a Principal and Interest loan.

For instance, if you pay $2000 a month on your loan, you will effectively pay $24,000 over the course of a year, whereas if you pay $1000 every fortnight, you’ll have paid $26,000 over the year.

This enables you to pay down your debt faster and cuts the interest applied to your loan in the process.

If you think about it in terms of how the lender calculates interest charges on your home loan, which is done daily, paying that $1000 every fortnight on say a $150,000 balance means the interest will be calculated on $149,000 over two weeks rather than $150,000 for an entire month between repayments.

For those considering making the switch to fortnightly repayments, there are a couple of provisos to making it work. Interest Rates

Firstly, this is a sound strategy if we are talking about your home loan, because a home loan is non-tax deductible debt, as opposed to an investment loan which allows you to claim the applicable interest charges.

Secondly, you have to ensure that the fortnightly repayments are exactly half of your monthly mortgage commitment, otherwise you won’t be reaping the benefits of that extra annual payment.

Overall, for home owners this is a great way to reduce your non-tax deductible debt faster and increase the equity in your own home sooner, which can ultimately become the stepping stone to venturing into property investment and building a lucrative property portfolio.

So why wouldn’t you make the change?

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more Metropole
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.


Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Kate Forbes is a National Director Property Strategy at Metropole. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
Visit Metropole Melbourne

'Do fortnightly repayments really make your mortgage shrink?' have 4 comments

    Avatar for Kate Forbes

    September 27, 2018 Home Loan Experts

    Home loan is that part of finance which is really difficult to analyze, so you need an expert and I guess I have got the expert in this post. It was very helpful thanks for sharing.


    Avatar for Kate Forbes

    December 31, 2017 Prashant Jain

    With invent of offset account, simply get your salary/income paid into your offset account and you don’t have to worry about how often or how much you pay towards your mortgage. All money is saving you interest.

    Also, this plan only works best for those who get paid fortnightly.

    This article is so 90s.


      December 31, 2017 Michael Yardney

      Prashant I agree with your suggestion of using an offset account smartly – there are many ways to skin a cat (oops ! is one still allowed to say that?)


    Avatar for Kate Forbes

    December 16, 2017 Rob

    Unfortunately this does not work for car loans.For a three year car loan of $484.62 monthly OR $233.67 fortnightly does not incur any savings for the term of the loan. Thats the way the loan has been structured. If I pay out the loan this month (Dec 2010) will incur and exit fee of $1000.


Would you like to share your thoughts?

Your email address will not be published.


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts