Work out how much you can save on your home loan by paying more frequently with Savvy’s fortnightly repayment calculator.
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The standard repayment schedule for home loans is traditionally centred around monthly repayments. However, there are big savings to be made by switching your loan repayments from monthly to either weekly or fortnightly. Find out why with Savvy and how you can work out your savings using our handy fortnightly repayment calculator.
Our fortnightly mortgage repayment calculator is simple to use. Enter your loan amount, the interest rate on your mortgage and your loan term, then click anywhere on the calculator to see your results.
On the left of the results panel, you’ll see how much your loan repayments will be if you repay your loan monthly and how much interest you’ll pay in total over the life of the loan. The fortnightly repayment column shows you what your repayments will be if you repay your loan fortnightly, plus the total interest you’ll pay and the savings you’ll make by switching your loan repayment frequency, both in terms of dollars and time saved. The weekly repayment column shows the same results information for weekly repayments.
The reason you’ll save on interest if you make your loan repayments fortnightly (or more frequently) is all to do with our calendar and the fact that home loan interest is calculated daily. Our calendar has 12 months in a year, which means if you pay your loan off monthly, you’ll make 12 payments in a calendar year.
However, there are 26 fortnights in a year, which is more than double the number of months, so it’s not just a matter of making two payments a month instead of one. If you make fortnightly repayments, you’re effectively making an additional monthly payment each year. By making loan repayments more frequently, you are reducing the principal sum that interest is calculated on more often. Each time you pay off more of your loan (earlier than you’d previously planned to with monthly repayments), the interest charged is reduced.
Similarly, the number of weeks in a year varies between 52 and 53, depending on which day of the week the year starts on, and if it’s a leap year. This means if you make your loan repayments on the same day each week, you may end up making either 52 or 53 payments in a calendar year. Because 52 weeks is exactly double the number of fortnights (26), this explains why the savings to be made are not so pronounced between weekly or fortnightly mortgage repayments, compared to monthly repayments.
Depending on the size of your loan, you can save tens of thousands by opting for more frequent repayments. According to the Australian Bureau of Statistics, the average loan amount in Australia in December 2021 was $602,035 (although this average figure rises to $779,770 for people in NSW).
If you enter this average loan amount of $602,035 in the fortnightly repayment calculator with an interest rate of 2.5% p.a. and a 30-year loan term, the calculator shows you could save $31,024 and three years and four months on your repayments if you switch from monthly to fortnightly repayments. Choosing weekly instead of monthly could save an estimated $31,222 and three years and four months in savings.
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The interest rate you pay on your home loan is the most important factor which determines the size of your loan repayments. By reducing the mortgage rate on your loan, you can shave thousands of dollars off its overall cost. Savvy compares home loans and brings you the key information so you can find the cheapest and best home loan possible.
Another way to save on the interest you pay is to make regular additional lump sum repayments to help pay off your loan more quickly. This is only likely to be possible with a variable rate loan, as fixed rate loans tend to have caps on the additional lump sum repayments permitted, such as between $10,000 and $30,000, or one or two additional repayments, permitted per year. Use Savvy’s home loan lump sum repayments calculator to see how making regular additional repayments can slash your interest bill.
As the fortnightly loan repayment calculator shows, the shorter your loan term, the less interest you’ll pay. If you refinance your loan and choose to pay off your mortgage over a shorter period, such as 20 years instead of 30, you’ll save thousands on the cost of your loan. You can use Savvy’s ‘how long to repay’ calculator to vary your repayments and see what effect this will have on your loan term.
An offset account works to reduce the interest you’ll pay on your loan by offsetting your principal sum on a dollar-for-dollar basis. This means if your outstanding loan debt is $300,000, but you have $50,000 in your offset account, you’ll only pay interest on $250,000. As interest is calculated daily, having your wages or salary paid into your offset account can mean savings of thousands of dollars.
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