How to Crush Your Mortgage Using the Fortnightly Repayments Savings Hack

But there's a catch, so let's break it down.

The fortnightly repayment trick relies on paying 1/2 the monthly repayment amount each fortnight. So if you mortgage repayments were $1,000 a month, you would start paying $500 a fortnight.

There are 12 months in a year, but there are actually 26 fortnights, right? That means you end up making the equivalent of 13 months of payments, which is one extra monthly payment each year!

Here's an example using the numbers above. With monthly you would pay 12 * $1,000 = $12,000 a year out of your budget and into your mortgage.

Howerver, with fortnightly you would pay 26 x $500 = $13,000 a year, which is $1,000 more.

So, the fortnightly repayment trick works, not because you are making "fortnightly payments", but because you are paying more into your mortgage over the year than if you just stick with the bank's monthly repayment amount.

That extra payment ($1,000 in our example above) is the secret weapon to paying down your mortgage faster. It goes directly toward your principal balance, reducing the amount of your loan you're charged interest on.

Yes, you can pay monthly, fortnightly or weekly, providing you are putting extra into your mortgage over the year (and it doesn't have to be exactly one extra month's worth of payments, it can be any amount).

From the example above, if we decide we want to pay an extra $1,000 into the mortgage over the year (a total of $13,000 instead of $12,000), then we could use any of the following and get a similar result:

The fortnightly repayment (using 1/2 the monthly amount) has been around for years and it works because it is so simple and easy to follow.

There are many strategies to paying down your mortgage using extra repayments (setting your own end date, cutting a number of years off your loan, etc.); but fortnightly repayments is one of the easiest to calculate and use.

And if you get paid fortnightly, it fits nicely with payday. It almost tricks you into making that extra payment without even noticing it too much.

Here's the catch. If you ask your bank for their "official" fortnightly repayment amount or you use an online calculator, you might NOT get the right number.

Their calculation normally factors in the 26 fortnights and adjusts the amount downwards, so you're not actually paying extra. Sneaky, right?

So in the example above, the bank and some online calculators wouldn't tell you to pay half of $1,000 a fortnight (i.e. $500); they would instead provide you with the correct fortnightly amount, which would be closer to $461.

And that number won't crush your mortgage - great for the bank; not so great for you!

So, don't rely on your bank's fortnightly repayment figure. Calculate it yourself! Just divide your monthly payment by two. That's your magic number.

Those extra payments, even small ones, make a big difference over time thanks to the power of compounding. The less you owe, the less interest you pay, and the faster your balance decreases. It's a snowball effect!

Try the MoneyFormula Five Steps to Success today and discover just how easy it is to take control of your money and crush your mortgage!

Have a play with the MoneyFormula app's different mortgage repayment calculators, try the debt repayment strategies and lock in a new loan end date to see exactly how much you can save on your mortgage.