Plenty of borrowers making monthly repayments on their home loans would be better off making fortnightly repayments.

There are plenty of borrowers making monthly repayments on their home loans who would be better suited to making fortnightly repayments, says Mortgage Fair general manager Amber Linzner.

”I think it’s just the norm that people think they should make monthly payments,” Ms Linzner says.

”Unless you’re educated about why you shouldn’t and why you should pay fortnightly, then people tend to stick with the default.”

Making fortnightly repayments on home loans is considered an attractive option because it enables the borrower to make more repayments in the course of the year than they would through monthly repayments.

If a borrower makes payments of $2000 a month, that amounts to $24,000 a year but if they make payments of $1000 a fortnight, that amounts to $26,000 a year.

Over the duration of the loan, the fortnightly repayment option can significantly reduce the overall cost of the loan.

Ms Linzner adds that borrowers who pay a designated amount in fortnightly payments during the year will be better off than borrowers who pay the same amount in monthly payments.

”If your balance is $100,000 and in a fortnight you pay $1000 off that, your interest calculated daily is on $99,000 for two weeks (as opposed to the $100,000 between monthly payments),” she says.

”You actually save years and interest on the loan by making payments more regularly.”

Changing payment frequency from monthly to fortnightly is simple, Ms Linzner says.

”However, for this method to be of benefit, you need to set your new fortnightly payment amount at exactly half your current monthly payment.”

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