Understanding how your home loan works can help you pay it off faster and save money in the long run. By paying more than your minimum monthly repayments, or just changing the frequency of your payments - you can get ahead.
More than minimum?
Consider if you can afford to pay more than the minimum monthly requirements on your home loan. The higher the repayment, the faster you’ll pay off your loan and the less interest you’ll pay over the life of the loan.
Fortnightly rather than monthly
While you make payments on your home loan monthly, fortnightly or weekly, interest is calculated daily and is based on how much you have left to pay on your loan. By making more frequent payments, you’re decreasing the size of your loan more often, lowering the amount of interest charged. The difference might not seem very obvious in the short term but over the course of your loan, you could save thousands of dollars.
The great thing about switching to fortnightly payments is that you shouldn’t feel a pinch. Your payments are exactly half the size of what they would be if you paid monthly, but you pay them twice as often. You also end up effectively making an extra payment in a year as there are 26 fortnights in a year.
Try our Repayment calculator to see what impact these changes can make.
At the end of the day, it comes down to what works best for you. In some cases, fortnightly payments are perfect because it might sync up with payday or may make budgeting easier.