Mortgage reduction strategy: paying fortnightly

By Steven Cross

The small step of switching from monthly to fortnightly repayments can put a big dent in your mortgage.


With so many mortgage reduction techniques available, one of the simplest and lowest risk tactics is also surprisingly effective.

Most lenders will give you the option of making fortnightly repayments, but why is this so effective in reducing your mortgage? The concept is really very simple: there are 52 weeks in a year and therefore there are 26 fortnights.

By paying fortnightly you are effectively making a total of 13 monthly payments (26 divided by 2) rather than 12 calendar months – giving you one month’s extra repayment every year.

It’s a simple concept but a potent one when it comes to driving down the amount you owe on your loan.

By paying your mortgage in fortnightly installments you could essentially wipe more than 4 years off the life of a 25 year loan term and save tens of thousands of dollars into the bargain.

And the best part is that once you factor the extra repayment into your budget you’ll hardly feel the pinch. Unlike other mortgage reduction methods that carry the burden of having to actively manage your mortgage on a monthly – even daily – basis, the fortnightly payment plan can be set up as a direct debit so you can simply ‘set and forget’.

It’s also less risky than other mortgage reduction methods.

Line of credit mortgages, for example, work only for the diligent, and not everyone likes living off their credit card. As soon as you start using your personal savings to buy essentials, the line of credit mortgage loses its effect as a loan reduction tool.

Just be sure to check with your lender that your loan facility allows you to make fortnightly repayments without any extra fees.

And if you’d like to put an even bigger dent in your loan, set up your fortnightly repayments over and above the minimum repayment, while keeping it manageable.

Not only will you better absorb the impact of interest rate movements, the extra dollars you invest will help knock down the remaining principal balance. This will ultimately reduce the interest you will have to pay and the term of your loan.

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