When it comes to paying back home loans, owners and investors have a number of options available. Monthly and fortnightly repayments are the most common choices, though most banks use monthly repayments as their default. We’ll look at why this default option is not necessarily the best choice, and why increasing the frequency of your repayments can be a better option. (Hint: fortnightly is good, but weekly is even better.)
The quicker you pay off the principal of the loan, the less interest you’ll be charged over the life of the loan. Your mortgage repayment is made up of both principal and interest. Everytime you make a repayment, the principal amount owing decreases, and since interest is calculated daily on the amount owing, the amount of interest payable also decreases. As you are making more frequent repayments when you pay fortnightly, the interest owed is therefore decreasing faster. Essentially – the quicker you pay off the principal and the more frequently you make repayments, the less interest you will be charged.
Knowing your payments and how long it will take for you to pay off the loan is crucial for homeowners and investors to understand their finances. A mortgage repayments calculator can give you a better idea of what your payments will look like over time, based on the type of mortgage you have and how often you’ll make payments. Use our handy calculator to get a better idea of what you’ll pay, how often you should pay it, and what you can afford.
There are times when homeowners will opt for the bare minimum when it comes to their repayments. Whether they’re cash-strapped or investing in more lucrative opportunities, there are legitimate reasons why you might stick to the monthly payment schedule. However, it could be worth considering for some people to switch to fortnightly or weekly repayments.
If you’re looking to buy a property, whether it’s a first home or investment, Shore Financial is a trusted expert in mortgage advice and finding the right schedule of repayments for your situation.
While there are many mortgage brokerages available to choose from, Shore Financial continues to stand out for being the trusted advisor in the industry, largely because we always go the extra mile for our clients. Whether you’re diversifying your portfolio or buying your first home, our team of mortgage brokers and specialists can help you find what you need on your terms. We’re here to help you take your portfolio to new heights so give us a call today for more information on how we can help.