Mortgage - Forthnightly Repayment - Reduce Interest Significantly?

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Fawkon

New Member
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Hi there,

I was advised by a friend that I should look into the possibility of moving my mortgage payments to a fortnightly basis if my bank will facilitate this.

Their reasoning is that as interest is accrued daily that by making more frequent payments on the principal it will effectively stifle the interest which is accruing each month.

I am also aware that moving to fortnightly would effectively trigger me to make 13 payments a year instead of 12 which would also postively impact interest over the length of the mortgage however this could also be done by making one lump sum overpayment a year. So I a, specifically focusing on whether there is a true benefit in the longterm in paying my mortgage in two payments per month to mitigate monthly interest rates or whether the impacts would be neglible at best.
(If any bank would even allow this)

Current situation:

Mortgage: 300,000
Term: 30 Years
APR: 2.55% Fixed for 5 years (I would imagine I could only consider a forthnightly approach after the fixed rate has concluded and moved to variable)

Thanks for your time and insights.
 
Making 13 payments instead of 12 a year, makes a big difference.

Making a payment 2 weeks earlier than scheduled, makes very little difference.

Your monthly payment is €1200

If you make a payment of €600 two weeks early , you will save
€600 x 2.55% x 14/365 or 60 cents if my calculations are correct.
So over a year, you will save €7

Brendan
 
Brendan Burgess said:
Making 13 payments instead of 12 a year, makes a big difference.

Making a payment 2 weeks earlier than scheduled, makes very little difference.

Your monthly payment is €1200

If you make a payment of €600 two weeks early , you will save
€600 x 2.55% x 14/365 or 60 cents if my calculations are correct.
So over a year, you will save €7

Brendan
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Thank you for your time Brendan.
 
Fawkon said:
Mortgage: 300,000
Term: 30 Years
APR: 2.55% Fixed for 5 years (I would imagine I could only consider a forthnightly approach after the fixed rate has concluded and moved to variable)
Click to expand...
Who is your current lender?
 
Fawkon said:
No option to overpay during this time unfortunately
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Of course there is. Your right to repay early is enshrined in law. However, the lender has a right to calculate an early repayment charge, which could be zero.
 
ClubMan said:
But that's precisely what making fortnightly repayments would be.
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RedOnion said:
Of course there is. Your right to repay early is enshrined in law. However, the lender has a right to calculate an early repayment charge, which could be zero.
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Sorry I should have been clearer, no option to overpay without incurring breakage fees I like some banks allowing 10% monthly.

When I mentioned making fortnightly payments it would be paying the same monthly amount but split over two payments a month instead of one.
 
Fawkon said:
Sorry I should have been clearer, no option to overpay without incurring breakage fees
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Break fee is only calculated on the bit you are repaying early. It could well be zero. And even if there is a break fee, it will always be less than the amount of interest you will save.


Fawkon said:
When I mentioned making fortnightly payments it would be paying the same monthly amount but split over two payments a month instead of one.
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Unless you're being paid fortnightly, I don't see the point.
 
Fawkon said:
When I mentioned making fortnightly payments it would be paying the same monthly amount but split over two payments a month instead of one.
Click to expand...
OK - say your repayment is €1,000 per calendar month currently.
So that's 12 months x €1,000 = €12,000 per annum.
If you switch to paying €1,000 / 2 = €500 per fortnight then that's (52 weeks in a year / 2 weeks in a fortnight) = 26 * €500 = €13,000 per annum.
I.e. accelerated repayment.
 
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