Mortgage Repayment Frequency

Mortgage Calculator Payment - Repayment Frequencies

How increasing your repayment frequency can help you pay off your mortgage sooner

Most people are pretty keen to pay off their mortgages as soon as possible. Whist new mortgagees may feel daunted by the extensive time span in front of them set out by their lender, there are several practical methods in reducing the time to pay off your mortgage.

The most obvious way to pay off your mortgage sooner is by making additional payments – everyone knows this. An extra $50 here, an extra $100 there, over time will make some difference. Obviously the more extra payments you make the quicker you will pay off your mortgage. That’s a no brainer.

Note: If you’re on the lookout for a new mortgage or are refinancing, and making extra payments is something you plan to do, check that this facility exists with your lender first – some mortgages won’t let you make additional payments.

One not so well known method to pay off your mortgage faster is by adjusting the repayment frequencies. Most lenders will setup repayment frequencies to be monthly by default. I guess this frequency is just what most people are used to.

However, by making your repayments more frequently (i.e. not additional repayments, but more frequent repayments) you can pay a little more off your loan without knowing it or it hurting the back pocket too much. In other words, by switching your repayments from monthly to fortnightly or even better, weekly, you will save in the long run and pay off your mortgage sooner.

Here’s an example of how this works. We’ll use round numbers to make things easier to illustrate however it’s just basic maths.

Lets say by default the bank has set you up with monthly repayments and your repayment amount is $2000 per month.

So over 1 year, you will pay off $24,000 (12 x $2000)

If we switch your frequency of repayments to weekly, first we work out what your weekly payment would be, then we multiply that by 52 weeks for the yearly figure.

2000 monthly payment / 4 to get weekly payment = $500

$500 per week for 52 weeks = $26,000

Thats a difference of $2000 per year.

It’s worth noting however, that this can be calculated in various ways to achieve a desired outcome. For example, instead of dividing your monthly repayment by 4 to get a weekly repayment figure, a lender may instead take your monthly payment and times it by 12 then divide it by 52. This will give you roughly the same result as paying it monthly. You’re no better off.

Nowadays, lenders are pretty flexible however they will always choose to look after themselves first. If you have this discussion with your lender, just ask them how they calculated the weekly payments to make sure it is in your advantage, i.e so your paying off your mortgage faster.


Please consult with your financial advisor, the information in this post is of an informative nature only and is by no way intended as financial advice.