Buying a house can be an exciting step in anyone’s life. After all, if you’ve been renting for many years, it can be a wonderful feeling to finally have the responsibility of your own home and be earning equity. That being said, buying a new home comes with a lot of decisions beyond which home you’re interested in purchasing. One of the decisions you’ll have to make is how frequently to repay your mortgage.
When it comes to deciding how to repay your mortgage, you have a few different options on the table. Perhaps the most common mortgage payment schedule is a monthly schedule. However, there are different considerations to make when setting up your mortgate repayment schedule, such as weekly, fortnightly or monthly repayments. Here’s a quick rundown of the pros and cons of each type of payment schedule to help you decide which makes the most sense for you.
Why choose monthly mortgage payments?
Monthly mortgage payments are the most common type of mortgage repayment plan borrowers will get. Most homeowners choose to make their monthly payments on the first of the month. While a monthly repayment schedule is easy to wrap your head around, you aren’t able to make any extra repayments automatically when you’re paying monthly. An extra payment can be helpful in stretching your money farther as a borrower, since homeowners making extra payments in the first few years of the loan wind up paying less interest over the full term of the loan since they can apply their extra repayments to the principal balance instead of the interest charge. That being said, if your budget is tight or you’re only paid monthly, paying your mortgage monthly may be the best option.
Are fornightly mortgage payments right for you?
A fortnightly or bi-weekly payment plan is a good way to pay your mortgage if you’re interested in making extra repayments but don’t have enough money on hand to allow you to commit to weekly repayments. When you’re paying your mortgage bi-weekly, you’ll make half payments towards your mortgage on each due date. However, the advantage of fortnightly mortgage payments is that you get an extra few payments in each year because of how the calendar falls. Especially if you’re paid bi-weekly, making an extra payment on your “bonus” paycheck won’t even feel like you’ve made an extra payment or money is tight.
Should you consider weekly mortgage payments?
Weekly mortgage payments also offer you the benefit of making a few extra payments, since you’ll get an extra five payments in during most years. It’s worth noting that, if money is tight, this sort of schedule can feel less like you’re getting ahead, especially if you’re not paid weekly.
Ultimately, the philosophy behind many of these schedules comes down to making an extra payment towards your loan’s principal. This is a good idea since it will save you money in interest over time. That being said, it’s important to note that you can pay extra towards your principal anytime you’d like as long as you pay your monthly, weekly, or fortnightly payment to your lender, too.
Some people’s individual circumstances make it so that automating their payment options makes it far more likely that they’ll actually make an extra payment towards the loan amount. If you want to know how much of an impact an additional payment will make in your repayment schedule, a mortgage calculator can help you play with numbers for weekly, fortnightly or monthly repayments. Knowing which schedule is the best for your budget and your home when it comes to the amount of interest you owe and your total repayment amount can make extra repayments much more straightforward and give you some financial peace of mind.