For some reason the question as to whether paying a loan fortnightly or weekly instead of monthly, saves money or not came into mind.
Over the years I've heard many people suggest paying the loan off fortnightly or weekly, but there's a trick in the technique. You take the monthly amount, divide it into two or four and pay this amount fortnightly or weekly. If you pay fortnightly you're paying an extra half monthly payment a year and if you pay weekly, you pay an extra monthly payment. So yes that will reduce your interest by an amount since you're paying more off your loan.
But what if you just calculate and pay off the loan weekly or fortnightly.
I decided to update my Mortgage Repayment Calculator so people can easily work out a weekly or fortnightly payment, if for example they get paid weekly or fortnightly. By doing this I could also quickly see the effect of making a weekly or fortnightly payment based on this being the correct amount to repay the loan off over the nominated period.
The bottom line.
The savings over the life of the loan are insignificant. For a $600,000 loan over 30 years at 5%, paying weekly compared with monthly saves about $1,000 in half a million dollars of interest. The real benefit is it may make it easier to budget for a loan if the loan payment matches you pay period. No real savings to be made.
Kelvin Eldridge
Mortgage Repayment Calculator
Over the years I've heard many people suggest paying the loan off fortnightly or weekly, but there's a trick in the technique. You take the monthly amount, divide it into two or four and pay this amount fortnightly or weekly. If you pay fortnightly you're paying an extra half monthly payment a year and if you pay weekly, you pay an extra monthly payment. So yes that will reduce your interest by an amount since you're paying more off your loan.
But what if you just calculate and pay off the loan weekly or fortnightly.
I decided to update my Mortgage Repayment Calculator so people can easily work out a weekly or fortnightly payment, if for example they get paid weekly or fortnightly. By doing this I could also quickly see the effect of making a weekly or fortnightly payment based on this being the correct amount to repay the loan off over the nominated period.
The bottom line.
The savings over the life of the loan are insignificant. For a $600,000 loan over 30 years at 5%, paying weekly compared with monthly saves about $1,000 in half a million dollars of interest. The real benefit is it may make it easier to budget for a loan if the loan payment matches you pay period. No real savings to be made.
Kelvin Eldridge
Mortgage Repayment Calculator
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