Basic question - monthly or fortnightly repayments

Discussion in 'Loans & Mortgage Brokers' started by christianeatouggh, 30th Jul, 2017.

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  1. christianeatouggh

    christianeatouggh Member

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    Hi all

    Just rethinking how i manage my repayments and was hoping to draw on the collective wisdom on this one. Currently on monthly payments but am thinking of switching to fortnightly. I have one SMSF loan of about 110K and two other loans. What do people who are on this forum, and are much more experienced than I, do in terms of repayments?

    many thanks
    chris
     
    christianeatouggh, 30th Jul, 2017
    #1
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    If you have an offset account with funds in it, it will make little difference.
     
    Scott No Mates, 30th Jul, 2017
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  3. tobe

    tobe Well-Known Member

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    Align the repayments with your salary/rental/income payments. So when you get paid, you make the payment.

    Note if the lending is interest only most lenders don't give you a choice, it must be monthly.
     
    tobe, 30th Jul, 2017
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  4. Redwing

    Redwing Well-Known Member

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    Most will let you make at least a minimum of additional payments each year...if so desired
     
    Redwing, 30th Jul, 2017
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  5. Tom Simpson

    Tom Simpson Well-Known Member

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    If you're making P&I repayments then it's beneficial to pay fortnightly over monthly. There are 26 repayments a year where as when paying monthly you're paying the equivalent of 24 fortnightly repayments. You can imagine over a 30 year term this definitely makes a big difference.

    If you're paying interest only then whatever is easiest.
     
    Tom Simpson, 30th Jul, 2017
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  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    If there's an offset account attached to the loan, then there's no difference between fortnightly and monthly cycles. Without the offset account, there's a slight financial advantage to fortnightly.

    Overall however, I'd suggest matching the repayment cycle to the income cycle. If you get your rent or salary fortnightly, have your repayments match. It's easier on budgeting and money management.
     
    Peter_Tersteeg, 31st Jul, 2017
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Be mindful, that some lenders, the amortisation schedule is adjusted so that fortnightl payments dont provide much of an advance.

    fortightly isnt magic, ............... you are paying 8 % more with those lenders that are doing the 26 vs 24payments

    ta
    rolf
     
    Rolf Latham, 31st Jul, 2017
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  8. Corey Batt

    Corey Batt Well-Known Member

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    Indeed - the old half month fortnightly payment trick is just that - it's no surprise that you making additional repayments will reduce the term and interest payable.

    Stick to what payment frequency suits your pay cycle and budgeting method - the difference if any is marginal at best - the real savings are from having an appropriate lender, product and structure to begin with.
     
    Corey Batt, 3rd Aug, 2017
    #8