Unlocking Repayment Frequency: Does Fortnightly Really Save You Thousands?

When you start looking into home loans, you do not have to go far on social media before you see a big claims like:

“Switch to fortnightly repayments and you will save thousands in interest and cut years off your mortgage.”

Sometimes there is truth in that, but it is not always the case, and it all comes down to how your lender actually calculates your repayments behind the scenes.

In this resource, we will walk through:

🔑The two different ways lenders calculate weekly and fortnightly repayments

🔑When the “save thousands” idea actually works

🔑How to choose a repayment frequency that actually suits your situation

This post supports Episode 22 of the First Home Unlocked Podcast: Unlocking Repayment Frequency: Does Fortnightly Really Save You Thousands?

If you missed Episode 21 – Unlocking How Your Mortgage Actually Works, it is a great place to start. That episode breaks down the key parts of your home loan so this topic will make even more sense.

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The Social Media Claim

If you have ever scrolled through finance content, you have probably seen something like: “Just switch from monthly to fortnightly repayments and you will pay off your loan years sooner.”

In some cases, that can be true. In many cases, it is not.

The reason is simple: It all depends on how your bank converts your monthly repayment into a weekly or fortnightly amount.

There are two main methods lenders use. They look similar on the surface, but they produce very different outcomes over 30 years.

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The Two Ways Banks Calculate Weekly and Fortnightly Repayments

Most banks start by working out your minimum monthly repayment for a 30 year loan. From there, they use one of two methods:

1. The Half Monthly Repayment Method

2. The Actual Method

Let us walk through both, using the same example from our Finance 101 series.

The Example We Will Use

• Purchase price: $800,000

• You use the 5% Deposit Scheme

• Deposit: $40,000

• Loan amount: $760,000

• Interest rate: 5.45%

• Loan term: 30 years

On these numbers, the minimum monthly repayment is around $4,291. We will use that figure in both methods examples below.

1. The Half Monthly Repayment Method

This is the method most social media posts are referring to. Under this method, the lender simply:

• Divides your monthly repayment by 2 for fortnightly, or

• Divides your monthly repayment by 4 for weekly

This means over a full year, you end up making more total repayments compared to if you paid monthly and that’s where the savings come from.

Using our example:

• Monthly repayment: $4,291

• Half-monthly fortnightly repayment: $4,291 ÷ 2 = $2,146 per fortnight

Now look at what happens over a full year:

• On monthly repayments:

  • 12 × $4,291 = $51,492 per year

• On fortnightly repayments (half monthly method):

  • 26 × $2,146 = $55,796 per year

So the big difference is with monthly repayments you pay for 12 months, with half monthly fortnightly repayments you effectively pay for 13 months. This means you are making one extra month’s repayment every year.

That extra month is where the time and interest savings come from. Not because you are paying more often, but because you are paying more in total each year.

In our example, switching to true half monthly fortnightly repayments could:

• Reduce your loan term by around 5 years, and

• Save roughly $155,000 in interest over 30 years compared to sticking with the minimum monthly repayment

That is a big impact, but it only applies if:

• Your lender actually uses this method, and

• Those higher yearly repayments are still comfortable for your budget

One More Important Layer to Keep In Mind

Before we move on, there’s one final piece to understand and we’ll go deeper into this when we cover Offset and Redraw in the coming weeks.

The interest saving you see in the half-monthly example only happens if those extra repayments are coming from new money you’re actually putting into the loan.

If your income is already being paid into your offset account, and it’s going to stay there for the life of the loan, then you’re already getting that same interest-saving benefit without needing to make extra repayments.

So the repayment frequency on its own isn’t the full story, the real impact comes from how much money you’re putting toward reducing the interest charged on your loan, whether that’s through extra repayments or by keeping your savings in offset.

2. The Actual Method

he second approach is what many banks use today often referred to as the Actual Method. You’ll also see this method used in a lot of online tools, including the MoneySmart mortgage calculator.

With this approach, the bank calculates the true minimum repayment required so your loan runs for the full term finishing right on schedule, not earlier and not later.

Here’s how it works:

1. The lender first works out your total minimum repayments for the year based on your monthly figure.

2. They then divide that annual amount into 26 (fortnightly) or 52 (weekly) instalments.

So the total you pay across the year stays exactly the same, regardless of whether you choose monthly, fortnightly, or weekly repayments, it’s just spread out differently.

There’s no “bonus” extra repayment built into this method, which means:

• Your loan term won’t shorten

• Your interest costs won’t change

• You’ll simply be paying the same annual amount in smaller chunks

This is why switching to fortnightly or weekly repayments won’t create savings under the Actual Method because you’re not paying any extra.

Using the same example as before:

• Monthly repayment: $4,291

• Annual repayment: 12 × $4,291 = $51,492

If you choose fortnightly repayments:

• $51,492 ÷ 26 = $1,980 per fortnight

• You’re still paying $51k for the year, just split across 26 smaller repayments

So under this setup, your loan won’t finish any sooner and the amount of interest you pay stays exactly the same. Nothing changes except how the repayments are spaced out.

This approach is what lenders refer to as the Actual Method.

You’ll notice the fortnightly repayment amount is lower than it would be under the Half-Monthly Method, so it doesn’t create any interest savings or shorten your loan term because you’re still paying the same total for the year, just in smaller instalments.

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What Really Happens Behind the Scenes at Your Bank

There’s no single rule that lenders follow when it comes to setting weekly or fortnightly repayments. Some banks still use the Half-Monthly Method, which creates real interest savings, others use the Actual Method, which doesn’t shorten your loan at all.

And the tricky part is you don’t usually get to choose which system your bank uses. It’s built into their internal repayment software.

In some cases, when a lender uses the Actual Method and you switch yourself to fortnightly payments, the timing can throw things off slightly. You might even have a repayment marked as late simply because of how the dates fall, not because you didn’t pay. This is why it’s worth getting clarity before you change anything.

If you’re unsure, checking with your broker or bank can confirm exactly how your repayments are calculated and save you from some unexpected surprises later.

If Your Bank Uses The Actual Method: Can You Still Get Ahead?

Now, if your bank does use the Actual Method and you still want the benefit of the Half-Monthly strategy, you can absolutely do it manually.

Here’s how:

1. Keep your formal repayment set to monthly with the bank

2. Take the monthly minimum and divide it by two

3. Set up an automatic transfer for that half amount every fortnight into your loan or offset

When you do this, you’re effectively adding one full extra repayment each year, which is what creates the interest saving under the Half-Monthly Method.

Just make sure your full monthly repayment is still being covered, as long as you meet the minimum, lenders typically don’t mind you paying extra.

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So Which Repayment Frequency Is Best?

Here’s my view after working with hundreds of first home buyers:

For most people, monthly repayments make the most sense. Why?

• You’re paying the actual minimum the bank requires

• There’s no confusion about which calculation method your lender uses

• You keep more control over your cash flow, rather than being locked into smaller, more frequent payments

If you want to get ahead and pay your loan down faster, you can still do that, just use extra repayment strategies through your offset or redraw. That way you stay flexible, especially as life changes.

At the end of the day, the best repayment setup is the one that aligns with your situation, your goals, and your financial comfort level… not just what sounds clever in a TikTok.

A Note For First Home Investors

And for anyone buying their first home as an investment, it’s important to remember that the interest portion of your repayments is usually tax deductible. So aggressively paying off the loan may not be the most effective strategy from a tax point of view.

That is where talking to both your broker and your accountant is important before you commit to a faster repayment plan.

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Final Thoughts: Focus on What Works for You, Not What’s Trending

Switching to fortnightly or weekly repayments can sound like a clever shortcut, especially when you see big claims online about saving thousands or cutting years off your loan.

But just like everything in your home buying journey, the real answer comes back to strategy, not hype.

There are two different repayment calculation methods used across lenders:

• The Half-Monthly Method, which can genuinely shorten your loan because you’re making the equivalent of one extra month’s repayment each year

• The Actual Method, where the total annual repayment stays exactly the same and only the timing changes

Only one of those methods creates real savings and not every bank uses it.

So rather than chasing a shortcut, the best approach is to:

• Understand how your lender calculates repayments

• Choose a repayment frequency that suits your income cycle and lifestyle

• Use extra repayments, redraw, and offset accounts intentionally

• Keep enough flexibility to adjust when life shifts, whether that’s starting a family, changing careers, or simply needing breathing room

This is how you build a repayment strategy that supports you now and gives you long-term confidence.

And if you’re not sure which method your bank uses or what structure fits your situation, we’re here to help you map it out.

Listen to Episode 22 for the full breakdown or Book a Get to Know You Chat to map out your plan with clarity and confidence.

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