Repayment Examples and Checklists
Fortnightly vs monthly home loan repayments: where the saving really comes from
Why paying half your monthly home loan repayment every fortnight cuts about five years off a 30-year Australian loan, when it does not, and how to set it up with your lender.
Paying half your monthly repayment every fortnight saves money because there are 26 fortnights in a year, so you make the equivalent of 13 monthly repayments instead of 12. On an illustrative $600,000 loan at 6.00% over 30 years, that extra month a year pays the loan off in about 24.5 years and saves roughly $149,000 of interest. The saving comes almost entirely from paying more, not from the timing. If your lender instead recalculates a "true" fortnightly repayment over 30 years, you pay less each fortnight and save almost nothing.
This guide is part of how to calculate home loan repayments. All figures are illustrative.
Three ways to pay the same loan
$600,000 at 6.00%, 30-year contract:
| Repayment method | Each payment | Paid per year | Time to repay | Total interest |
|---|---|---|---|---|
| Monthly | $3,597.30 | $43,167.60 | 30 years | about $695,029 |
| Calculated fortnightly (lender's 780 payments) | $1,659.50 | $43,147.00 | 30 years | about $694,410 |
| Half monthly, every fortnight | $1,798.65 | $46,764.90 | about 24.5 years | about $546,157 |
| Quarter monthly, every week | $899.33 | $46,765.16 | about 24.5 years | about $545,497 |
The calculated fortnightly option saves only about $600 over 30 years, from the slightly earlier payments. The half-monthly option saves about $148,900 and finishes around five and a half years early.
Proof that it is the extra money, not the timing
Half-monthly fortnightly payments add $46,764.90 - $43,167.60 = $3,597.30 a year, exactly one monthly repayment. Spread that over 12 months and it is about $300 a month.
Now pay monthly with an extra $300 a month ($3,897.30):
- Time to repay: about 295 months, or 24 years 7 months
- Total interest: about $547,614
That is within about $1,500 of the fortnightly result. In other words, you can get nearly the same benefit by adding $300 to a monthly repayment. Choose whichever schedule fits your pay cycle. See extra repayments worked example for other amounts.
Run it on your own loan
The effect depends on your balance, rate and remaining term. A second illustrative example: $450,000 at 6.20% with 25 years left.
- Monthly repayment over 300 months: about $2,954.62. Total interest: about $436,386.
- Half of that every fortnight: $2,954.62 / 2 = about $1,477.31.
- Paid 26 times a year, that is $38,410 a year instead of $35,456, about $2,955 more, or one extra monthly repayment.
- The loan is repaid in about 545 fortnights, just under 21 years, and total interest falls to about $353,843.
- Saving: about $82,500 of interest and four years.
The shorter the remaining term, the smaller the saving in dollars, because there is less time for the extra principal to avoid interest. Use the repayment calculator to find your monthly figure, then halve it.
Why the timing barely matters
Interest on most Australian home loans is calculated daily on the outstanding balance. Paying half the money two weeks earlier reduces the balance for those two weeks, which saves a little interest each time. Over 30 years this adds up to only a few hundred dollars on a $600,000 loan. It is real, but small compared with paying an extra month each year.
How to set it up
- Ask the lender how it calculates fortnightly repayments. Some lenders set the fortnightly amount at half the monthly repayment; others recalculate it over 780 fortnights. You want the first, or you can choose your own higher amount.
- Check that extra payments are allowed. Variable loans usually allow unlimited extra repayments. Fixed loans often cap them; see fixed vs variable vs split.
- Line up with payday. If you are paid fortnightly, schedule the repayment a day or two after pay lands to avoid dishonours.
- Keep the amount when rates fall. If your variable rate drops, ask the lender not to reduce your repayment. Keeping it the same works like an extra repayment.
- Watch redraw. Extra repayments usually sit as available redraw. If you redraw them, the saving disappears.
When fortnightly repayments are not worth it
| Situation | Why |
|---|---|
| Fixed loan with a low extra repayment cap | The extra may exceed the cap and attract break costs |
| You are paid monthly | Fortnightly debits may fall before pay arrives |
| You have high-interest debt | Clearing a credit card at 20% beats prepaying a loan at 6% |
| Your offset account is better | Money in an offset saves the same rate and stays accessible; see offset vs redraw |
| Your emergency savings are thin | Keep a buffer first |
Fortnightly repayments and borrowing power
Lenders assess your borrowing power on the contracted minimum repayment, so choosing fortnightly does not change approval. It also does not lower your minimum: if money is tight later, you can usually switch back to the minimum monthly amount.
Frequently asked questions
Do all lenders offer fortnightly repayments?
Most do for variable loans. Some charge nothing; check the fee schedule. A few products only take monthly repayments, in which case add a voluntary extra amount instead.
Does weekly beat fortnightly?
Barely. A quarter of the monthly repayment every week also adds up to 13 monthly repayments a year, and saves only a few hundred dollars more than fortnightly in the example above.
Will paying fortnightly change my loan term on paper?
No. The contract term stays the same; you simply pay the loan off early. Some lenders let you reduce the minimum repayment later while staying ahead of schedule.
Is it better to pay fortnightly or put the money in an offset account?
Mathematically similar if the offset is on the same rate. The offset keeps money accessible, which matters for emergencies. A redraw facility can be restricted by the lender.
Sources
- ASIC Moneysmart — paying off your home loan faster
- ASIC — consumer credit obligations
- Australian Financial Complaints Authority — disputes about repayment processing
