The repayment myth - weekly and fortnightly versus monthly
There’s a common belief in the mortgage marketplace that simply switching from monthly to weekly or fortnightly repayments will save you thousands of dollars and years off your loan term. The idea sounds compelling — but the reason most people think it works isn’t quite right.
The myth is based on the idea that because interest is calculated daily on your outstanding balance, paying more frequently reduces that balance sooner, saving you interest. In reality, the frequency of your payments makes very little difference on its own. What actually matters is how much you pay over the course of a year.
Here’s where it gets interesting.
If your monthly repayment is $800, that’s $9,600 per year. If your lender switches you to fortnightly repayments by simply halving that figure, you’d pay $400 per fortnight. Because there are 26 fortnights in a year — not 24 — you’d actually be paying $10,400 annually. The same applies to weekly repayments: $200 per week × 52 weeks = $10,400.
That’s an extra $800 per year, or roughly one extra monthly payment. And that extra amount is exactly why you save money and reduce your loan term — not because you’re paying more often, but because you’re paying more overall. What looks like banking magic is actually straightforward maths.
Frequency ≠ savings. Extra payment = savings.
The secret isn’t how often you pay — it’s how much more you end up paying each year.
However, not all lenders use this method. Some calculate fortnightly repayments by taking your monthly repayment, multiplying by 12, and dividing by 26 — giving you $369.23 per fortnight. This means your annual total stays roughly the same as monthly repayments, and you’d see little to no benefit.
So before switching, it’s worth asking your lender exactly how they calculate your repayments. The frequency itself isn’t the secret — but if your lender’s method has you paying a little extra each fortnight, that additional amount will quietly chip away at your loan over time.
