Is it best to repay your mortgage with fortnightly repayments or monthly ?and if so how much difference does it really make.
I did some calculations based on a 100,000 mortgage at 7% per annum, with the interest calculated daily but charged monthly.
I also used one of the big banks calculators to determine the repayment rates.
The first calculation was based on the monthly repayments of $707.00.
Total Interest over 1 year was: $6,948.42
Total Repayments over 1 one was: $8,484.00
Next was a Fortnightly repayment based on the above annual repayment, divided by 26 fortnights: $326.30 per F/N
Total Interest over 1 year was: $6,935.14
Total Repayments over 1 one was: $8,483.80
Next, a Fortnightly repayment based on the banks recommended payment of one half of a months normal repayment: $353.20 per F/N
Total Interest over 1 year was: $6,910.91
Total Repayments over 1 one was: $9,183.20
So, the answer is only a very small saving in interest.
Using option Two, the saving is $13.28 for the entire year.
Using option Three, the saving is $37.51 for the entire year.
The REAL benefit is with option Three, where the difference is that you are actually paying more per month, than in the first monthly payment version, a consequently your annual repayments are that much higher. This is where the real difference is.
This could still be done, by paying monthly, but by paying a higher monthly figure, ie:
A monthly repayment of $765.30.
Total Interest over 1 year was: $6,925.29
Total Repayments over 1 one was: $9,183.60
The best option from all of them is actually option THREE.