Fortnightly home loan repayments, explained

Resources · Home loans and saving · 4 min read Building

Key points

• Paying half your monthly repayment every fortnight means 13 monthly repayments a year, not 12.
• Almost all the saving comes from that extra repayment, not from paying more often.
• Paying the exact monthly equivalent each fortnight saves very little.
• Fortnightly payments can suit people who are paid every two weeks.

Do fortnightly mortgage payments save money?

Yes. But mostly not for the reason people think.

Fortnightly mortgage payments save money because of a quirk of the calendar. A year has 26 fortnights. So if you pay half your monthly amount every fortnight, you end up making 13 months of repayments a year instead of 12.

That extra month goes straight onto the balance. Paying more often helps a little too, just far less than most people expect. In some countries this is called a biweekly payment.

A worked example

Here’s what we’re assuming:

• Loan: $400,000
• Rate: 6% a year
• Term: 30 years
• Monthly repayment: $2,398.21, with interest charged monthly
• For the fortnightly options, interest is charged each fortnight at 6% ÷ 26
• The rate never changes

The same maths works in any currency.

Where the saving really comes from

Look at the second and third rows. They tell the whole story.

The exact monthly equivalent is the monthly repayment × 12 ÷ 26. You pay the same total each year, just in smaller, more frequent bites. Over 30 years it saves only $1,163.24, and the loan finishes about a fortnight early. Hardly worth the fuss.

Half the monthly amount every fortnight is something else entirely. You pay $31,176.86 a year instead of $28,778.52. That extra $2,398.34 a year cuts about five and a half years off the loan and saves $99,250.49.

Now check the last row. Paying one extra month a year, spread across 12 monthly payments, saves almost exactly the same: $98,218.77. So the frequency barely matters. What matters is that more money goes in.

Why paying more often helps a little

On most home loans, interest is worked out on the balance. Pay more often and the balance drops a touch sooner, so slightly less interest builds up.

How much depends on how your loan calculates interest. Some work it out daily and charge it monthly. Others do it differently. Either way the effect is small, as that second row shows.

When fortnightly mortgage payments might suit you

There are good practical reasons some people go fortnightly.

If you’re paid every two weeks, a fortnightly repayment lines up with your income. The money leaves soon after it lands, before it gets spent on something else. Plenty of people also find the 13th repayment painless, because it’s spread across the year and they never really notice it. And smaller, regular amounts can simply feel easier to handle than one big one.

Other people skip it, and with good reason. If you’re paid monthly, fortnightly repayments may not match your income at all. If cash is already tight, that extra month of repayments is real money, and it could put pressure somewhere else. Then there are the loan rules. Not every loan offers fortnightly repayments, and some charge a fee to change the schedule. Check your loan documents.

Other ways to get the same effect

Since the saving comes from the extra money, not the timing, you can get a similar result other ways. You could add one twelfth of your repayment to each monthly payment. You could make one extra repayment a year from a tax refund or bonus. Or when your rate falls, just keep paying your old amount.

Our guide to extra repayments on a home loan shows how these add up. To see how each repayment splits between interest and principal, read how a home loan repayment works.

Common questions

How much do fortnightly mortgage payments save?

On a $400,000 loan at 6% over 30 years, paying half the monthly amount every fortnight saves $99,250.49 in interest. Paying the exact monthly equivalent fortnightly saves just $1,163.24.

Is paying fortnightly the same as an extra payment each year?

Pretty close. Half your monthly repayment every fortnight adds up to one extra monthly repayment a year. That extra money does most of the work.

Can I switch my home loan to fortnightly repayments?

Many loans allow it, but not all. Your loan documents explain the repayment options and any fees.

Try it

The home loan extra repayments calculator shows what an extra amount each month could save on your own loan. If you’ve got other debts as well, find your Freedom Date.

General information only, not financial advice. Your situation is your own.