Is It Better To Pay Mortgage Weekly?

Most home loans in Australia have monthly repayments as they are set by default. However, you can save money if you can afford to increase the frequency of your repayments to weekly or fortnightly. In this blog post, we’ll shed light on how it works.

Weekly, Fortnightly, or Monthly Mortgage Repayments: How Can You Save?

Both weekly and fortnightly mortgage repayments can possibly save you money as compared to monthly repayments (if you are allowed to make this change). One reason behind this is the way interest is incurred on a home loan. The interest rate on the outstanding balance of a home is calculated regularly and then added over the time period of your loan repayment. If that mortgage repayment time is monthly, then that soon adds up to 30 days of interest rate, based on the number of days in the month and how a lender calculates.

If you can afford to increase the frequency of your mortgage repayments, to weekly or fortnightly, then you can save on the outstanding amount of your loan much earlier. As a result, it can save you money in terms of interest over the time period of your loan. Despite this, you can ask us, best mortgage broker in Sydney for more details.

However, there is another simple way to save money. If you are allowed, then you can change from monthly to fortnightly mortgage repayments and make half payment of your monthly repayment every time. Monthly mortgage repayments are paid every month and there are 12 months in a year, but 52 weeks. If you repay fortnightly, then you will make 26 fortnightly repayments in a year.

It means you would be paying more money than you would if you made 12 monthly repayments per year. You would be paying the same as 13 calendar monthly repayments in a 12-month period and maximising your repayment is one way to pay off your loan faster. You could also have an option to switch to weekly repayments at a quarter of your monthly repayment plan. Again, it would give you 52 weekly repayments, equal to an extra calendar monthly repayment a year.

What to Consider Before Changing the Repayment Frequency?

Before you change the repayment frequency, you should consult with a home loan mortgage broker. Here are a few things you need to consider before switching to a new repayment plan:

  • Check If You are Allowed

If you have chosen a variable-rate home loan, you may be allowed to change your repayment frequency, however, it is suggested to check it. On the other hand, if you have chosen a fixed-rate home loan, you might not be allowed to flip. If your loan doesn’t allow you, then you could choose to make extra repayments. Apart from this, you might be interested in considering refinancing a home loan.

  • Check If You Can Afford It

Switching to fortnightly or weekly may sound simple, but it could have an impact on your finances. Therefore, it is advisable to consider your budget, if it allows you to switch to fortnightly or weekly mortgage repayments, then you can do it.

  • Match Payments with Your Payslips

If you think that you can afford extra costs, then ensure to match more regular payments with your pay cycle. It will make you able to budget properly and then you can re-work your budget to consider your regular savings and other expenses. You can speak to Star Homeloans in Australia for the right mortgage repayment plans.

 

What If You Make Extra Repayments?

There are various benefits if you decide to make extra repayments. Here are some benefits of home loans that come with additional repayments:

  • It’s simple, if you owe more money, the more interest rate you will have to pay. If you make additional repayments, you can reduce the principal amount you owe, which will reduce the interest payable over the loan term.
  • Paying additional each week or month could minimise the time it takes to pay your loan, helping you get home ownership soon. You may find us near you when you search for the ‘best mortgage broker near me‘.
  • If you have an offset sub-account, you will be allowed to redraw the additional repayments you made when you need them.

Conclusion

Now, you can better decide if you want to switch to a new mortgage repayment plan. For more information, you can also get in touch with Star Homeloans.

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