Applying for a mortgage is just the beginning of your home loan journey. You still need to choose the best repayment frequency. So should you pay weekly or monthly? How about fortnightly? The decision you make significantly impacts how fast you can pay off your loan. And how much interest you’ll pay over time.

Need guidance in choosing the right frequency? Work with a mortgage broker in Sydney. They’ll guide you based on your financial situation and goals.

The Impact of Weekly vs. Monthly Payments

Have you decided on your mortgage payment schedule? You need to learn how interest is calculated first because it’s also part of your payments. So how is it done? It is usually calculated every day but compounded monthly. That means you whittle away at the loan principal faster the more repayments you make.

Here are the advantages and disadvantages of using either:

Benefits of Weekly Payments

You lessen your debt quicker when you pay faster. And paying weekly means you’re making 52 payments yearly. Since you’re paying faster, the total interest charged overall is also lower.

Drawbacks of Weekly Payments

Weekly payments can reduce interest. But they can feel more financially demanding. That’s because you’re paying more often even though they’re in smaller amounts. Weekly payments might also feel less convenient to manage if your income comes in monthly. That’s because they require more frequent budgeting.

Benefits of Monthly Payments

Do you receive a monthly salary? You can align it with monthly payments. It’s the easiest to track and manage because you only do it once a month.

This offers consistency for homeowners who prefer a predictable payment structure. However, you may end up paying more in interest compared to more frequent payment schedules. Even if you save time by only making one payment a month.

Drawbacks of Monthly Payments

The main disadvantage of this is that you’ll most likely pay more in interest. The loan principal remains higher for longer periods since you’re paying less frequently. This allows interest to accumulate more quickly.

Fortnightly Repayments: A Happy Medium?

Fortnightly repayments lie between weekly and monthly payments. This one lets you make 26 payments per year. Which works out to be roughly the same as making an extra monthly payment each year. This structure can help reduce the interest charged and shorten your loan term. But without the frequency of weekly payments.

Do you want to save on interest without having to pay as often as weekly? Then this can be a great option.

Factors to Consider When Choosing a Repayment Schedule

1. Your Income Cycle
   Your repayment plan is largely based on how frequently you get paid. For example, do you get paid weekly or fortnightly? Your schedule helps you set your mortgage repayments to be more in sync with your other monthly bills. This greatly helps with budgeting. Or maybe you get paid every month? If that is the case, it might be more practical to stay with monthly repayments. So you don’t have to deal with more regular payment management.
2. Budgeting and Cash Flow
   How comfortable are you with budgeting? Making payments weekly and fortnightly means managing cash flow more frequently. Monthly payments would suit those who favor a less in-depth methodology to budgeting better. But switching to weekly or fortnightly payments can allow you to pay down your loan more quickly. That is if you want to really stay on top of your finances and are happy making a regular payment.
3. Interest Savings
   Although paying more often tends to save you on interest, the difference may not be as significant as it seems for your loan size and rate of interest. You should balance the savings versus the inconvenience of paying more often. A mortgage broker in Sydney can help you figure out the interest savings based off your payment schedule.
4. Loan Terms and Lender Flexibility
   Certain lenders may be more flexible with repayment plans. Whereas some expect you to abide by a specific timeline. This is why you want to go over your loan terms and talk about it with your lender. This way, you are guaranteed approval to transfer to a more frequent payment plan. If that is what you want.

Common Myths About Weekly Mortgage Payments

Let’s clear up the confusion:

Myth 1 – You Pay More with Weekly Payments: Not true at all. Weekly payments only break down your monthly repayments into smaller portions. The same is true for fortnightly payments. You’re not paying more unless you opt to overpay. Which can help you pay off your loan faster.

Myth 2 – Weekly Payments are Always Better: This payment frequency can reduce interest over time. But it is not always suited for everyone. Always choose a schedule that fits your current financial situation. Along with your goals and lifestyle.

Can You Switch Between Repayment Schedules?

Did you start with monthly payments but then later on decide that weekly payments are a better fit? Then you can make the switch. Most lenders offer some flexibility so they can adjust your repayment schedule. But always check with your lender first. As some loans may come with conditions or fees for making changes to your repayment plan.

AFMS Group: Supporting Your Mortgage Decisions

Choosing the right mortgage payment schedule can feel confusing. That’s why AFMS Group is here to help. Considering weekly payments? How about fortnightly? Or maybe monthly payments would be best? Partner with a trusted mortgage broker in Sydney to determine which is right for your financial future. Get in touch today.