How Frequent Repayments Can Reduce Your Total Interest Payable
When you take out a home loan, the focus often falls on negotiating the best interest rate. While the rate you secure is critically important, how often you make your repayments can have just as much impact on the total interest you pay over the life of the loan.
By moving to more frequent repayments — such as fortnightly or weekly instead of monthly — you can save thousands of dollars and shorten your mortgage term by years.
This guide explains how repayment frequency works, why it can save you money, and how to apply this strategy effectively within the Australian home loan market.
Understanding How Home Loan Repayments Work
When you borrow to buy a home, your repayments cover two key components:
- Principal — the amount you borrowed
- Interest — the cost of borrowing that money
The size of your repayments depends on:
- The loan term (for example, 25 or 30 years)
- The interest rate
- The repayment frequency (monthly, fortnightly, or weekly)
Crucially, interest on your loan is calculated daily based on your outstanding balance. That means the more frequently you reduce your principal, the less interest you pay overall.
How Repayment Frequency Affects Total Interest
Monthly Repayments (The Standard Setup)
Most Australian home loans default to monthly repayments.
Example:
- Loan amount: $500,000
- Interest rate: 5.0%
- Loan term: 30 years
- Monthly repayment: approximately $2,684
While convenient, monthly repayments allow interest to accumulate over the month. This is the standard setup, but it’s not the most efficient if you want to reduce long-term costs.
Fortnightly Repayments
Fortnightly repayments involve splitting your monthly payment in half and paying that amount every two weeks.
Why this saves money:
- There are 26 fortnights in a year.
- 26 half-monthly repayments equal 13 full monthly repayments per year.
- This effectively results in one extra monthly repayment each year without you needing to increase your budget.
Example:
- Monthly repayment: $2,684
- Fortnightly repayment: approximately $1,342
- Annual total with monthly: $32,208
- Annual total with fortnightly: $34,892
That extra payment goes directly to your principal, reducing future interest.
Weekly Repayments
Weekly repayments divide your monthly repayment by four and apply it each week.
Example:
- Weekly repayment: approximately $671
- Annual total: $34,892
Weekly repayments deliver similar savings to fortnightly payments but may suit those who are paid weekly or prefer to align payments with their income cycle.
How Much You Could Save: A Practical Example
Here’s how switching repayment frequency can impact a 30-year loan.
| Repayment Frequency | Monthly Repayment | Total Interest (30 years) | Total Repayment |
| Monthly | $2,684 | $466,279 | $966,279 |
| Fortnightly | $1,342 | $392,924 | $892,924 |
| Weekly | $671 | $392,831 | $892,831 |
By moving from monthly to fortnightly or weekly repayments, you could save around $73,000 in interest over the life of the loan.
Why Frequent Repayments Work
Extra Payments Without Feeling It
By switching to fortnightly or weekly payments, you automatically make one extra monthly repayment each year. This small change compounds into significant long-term savings.
Faster Principal Reduction
Since your loan’s interest is calculated daily, every extra dollar paid toward the principal reduces the balance on which future interest is calculated. The faster you reduce the principal, the less you pay in total interest.
Shorter Loan Term
More frequent repayments help you pay down your loan sooner, effectively cutting years off your mortgage term.
Compounding Benefit
Each extra repayment reduces your principal, which lowers future interest. Over time, this compounding effect creates a snowball of savings.
Benefits of Switching to Fortnightly or Weekly Repayments
- Interest savings: Reduce total interest costs by tens of thousands of dollars.
- Faster mortgage payoff: Own your home outright years earlier.
- Improved cash flow management: Match repayments with your pay cycle to simplify budgeting.
- Minimal lifestyle impact: Extra annual repayments are spread across the year, making the strategy easy to adopt.
How to Switch to More Frequent Repayments
- Check Your Loan Terms
Review your home loan agreement or speak to your lender to confirm if you can change repayment frequency. Most Australian lenders offer this flexibility. - Contact Your Lender
Ask to switch from monthly to fortnightly or weekly repayments. Make sure the new schedule works with your income cycle to avoid cash flow issues. - Set Up Automatic Payments
Automating your repayments ensures consistency and removes the risk of missed payments, especially on more frequent schedules. - Consider Additional Contributions
If your budget allows, round up your repayments or make occasional lump-sum payments to reduce your principal even faster.
Factors to Consider Before Switching
Loan Features
Some fixed-rate loans or special mortgage products may limit:
- Extra repayments
- Repayment frequency changes
- Redraw or offset account access
Always check for restrictions or potential fees.
Budget Flexibility
While frequent payments save on interest, they require you to monitor cash flow more closely. Ensure your budget can handle the switch comfortably.
Offset Accounts
If you have an offset account, compare whether keeping extra funds there achieves similar or better savings compared to increasing repayment frequency.
Refinancing Plans
If you are considering refinancing, think about how a change in repayment frequency fits with your broader financial goals.
Common Questions About Frequent Repayments
Do all lenders allow fortnightly or weekly payments?
Most Australian lenders do, but some fixed-rate or special offer loans may have restrictions.
Is there a big difference between fortnightly and weekly repayments?
The difference in savings between the two is minimal. Choose whichever suits your pay cycle and budgeting style.
Can I combine frequent repayments with an offset account?
Yes. Combining frequent repayments with an offset account can maximise savings.
How much can I save by switching to fortnightly payments?
Savings vary based on loan size and interest rate, but as shown earlier, a $500,000 loan at 5% over 30 years could save more than $73,000.
Final Thoughts: A Simple Strategy for Big Savings
Switching to more frequent home loan repayments is one of the most effective and accessible strategies to save money and pay off your mortgage sooner.
By simply moving to fortnightly or weekly repayments:
- You make an extra monthly repayment each year.
- You reduce your principal faster, cutting down future interest.
- You shorten your loan term, gaining financial freedom years ahead of schedule.
For most Australian homeowners, this strategy can be implemented with minimal effort and without major lifestyle sacrifices. Before making the switch, review your loan terms, consult with your lender, and ensure the schedule aligns with your financial plan.
Remember, in the world of home loans, small changes can deliver substantial long-term rewards.
