How Frequently Should I Make Loan Repayments?
One of the most common questions asked by first home buyers is whether they should make monthly, fortnightly or weekly repayments on their home loans.
The truth is that there is no answer that will be right for everyone.
The interest on your loan is calculated daily, so it follows that the quicker - or more frequently - you pay it back, the less interest you will be charged.
With this in mind, weekly repayments would seem to be the ideal. As the total amount you owe on your loan reduces each week, the proportion of interest you are charged does so too.
Yet in reality, what most people find is the best thing to do is to match the frequency of loan repayments with how often they get paid.
This way, as soon as the money arrives from your employer, it goes straight to reducing your loan balance, leaving you the rest to live on.
Those who wish for a compromise may find it in fortnightly repayments. By paying half of your monthly loan payment every two weeks, you will actually make the equivalent of an extra monthly repayment each year.
That means you will pay less interest and be mortgage-free faster.
To get more detailed information on your situation, talk to a Loan Market mortgage broker today.