Accelerated repayments & its benefits

An accelerated repayment is when the standard home loan monthly repayment is divided by 2 for fortnightly or by 4 for weekly and you pay this repayment figure. This will reduce the amount of interest you're charged and it will also lower the number of years left to pay off your home loan.

More savings for you which is always the best intention! The other method is called the true repayment method where it won't reduce the years off your loan or save you in interest charges.

Paying fortnightly allows you to squeeze in one extra repayment a year. For example, based on the monthly repayment of $2,000, after a year you will have paid $24,000 (12 x $2,000). To pay fortnightly, we split the monthly payment in half, making a fortnightly payment of $1,000. Given there are 26 fortnights in a year, you’ll pay $26,000 (26 x $1,000) or $2,000 more than if you were making repayments monthly, and therefore you’ll have less interest payable (as interest is calculated on a daily balance and charged monthly).
However, what lenders don’t often mention is that if you do select fortnightly payments, they must be set up in the correct manner. There are two ways this can be done - a true repayment option; and an accelerated repayment option. The accelerated option is the better option as the interest cost is less, allowing you more of your repayment to go towards paying the principal off your loan, which means your home loan is paid off sooner. If the true repayment way is set up – which lenders often do, then it has no direct benefit and is the same as making monthly repayments.

We are a message away if you want to validate that you're maximising the best option!