Yes, you can - and you will likely save money on interest, and shorten the duration of the loan term. How? By changing the frequency of your home loan repayments from monthly to fortnightly (or weekly), you actually repay an extra month per year. It works like this:
- 12 monthly repayments is the equivalent of 24 fortnightly repayments.
- There are 26 fortnightly repayments over a 52-week year - an extra two fortnightly repayments a year.
The savings over the life of the loan can be significant. For example, for a $500,000 loan at 5.00%p.a. over 30 years.
- Monthly repayments are $2685, and the interest paid over 30 years is $466,280.
- Fortnightly repayments are $1343, and the interest over 30 years is $380,460. This represents an interest saving of $85,820! And it shaves 4 years and 8 months off the loan term.
Calculate how much you could save by switching from monthly to fortnightly repayments.
