Top Strategies to Pick Your Refinance Repayment Frequency

When you refinance, you get to choose how often your repayments leave your account. That choice is easy to overlook, yet it affects your cashflow every single pay cycle.

For homeowners in Mulgrave weighing up a switch, the question is rarely just about the rate. It is also about how the loan fits into your week, your pay and your household budget. Here is how to think it through calmly.

Which Repayment Frequency Suits You When Refinancing?

The right frequency is the one that lines up with when you are paid and that you can sustain without strain. Lenders commonly offer weekly, fortnightly and monthly options, though the choices on a given loan vary, so confirm them during your refinance application.

If you are paid fortnightly, a fortnightly repayment means the money leaves just after it arrives, which makes budgeting more predictable. If you are paid monthly, a monthly repayment is usually the natural fit. Matching the two reduces the chance of a shortfall between pay days.

The trade-off is flexibility. More frequent repayments mean smaller, more regular debits, and some households find this tighter than one larger payment after a monthly pay.

Weekly, Fortnightly and Monthly Repayments: A Worked Example

Paying half your monthly repayment every fortnight results in 26 half-payments a year, which equals 13 monthly repayments instead of 12. That one extra month is where most of the difference comes from.

As an illustration only, consider a homeowner refinancing a loan amount of $600,000 over 30 years at an example rate of 6.75% p.a. The monthly repayment works out at about $3,892. Across a year, that is roughly $46,700.

They are paid fortnightly, so they ask for half the monthly amount, about $1,946, to be debited each fortnight. Over 26 fortnights that adds up to roughly $50,600, about $3,900 more than the monthly schedule. The same applies to weekly: a quarter of the monthly amount, about $973, paid across 52 weeks.

The outcome depends on what they want. If the goal is to repay faster, the half-monthly fortnightly amount does that without a separate decision each month. If the goal is only to match pay days and keep the annual cost the same, they would set the fortnightly amount at about $1,796, which is the yearly total of $46,700 divided by 26. Both are valid. The first lifts the commitment on the household budget, and the second keeps it where it was.

This example is illustrative and uses a single rate for every comparison. Your own figures will differ, so use a repayment calculator with your actual balance, rate and remaining term.

Should You Keep Your Old Repayment After Refinancing to a Lower Rate?

If you refinance to a lower rate, your minimum repayment will usually fall, and you can choose to keep paying the old amount. Doing that directs more of each payment to principal, though it reduces the cashflow you gain from the switch.

This is a decision worth making on purpose. Some households want the breathing room and take the lower minimum. Others keep the higher payment and treat it as a built-in savings habit. Your home loan options will often let you vary this later, but confirm how your lender handles changes.

Be cautious if a lower repayment comes from stretching the loan term. ASIC's guidance says a consumer should be told when repayments fall only because the term is longer, since more interest is paid over that longer period.

Fixed Rate Period Ending: What to Check Before Choosing a Frequency

If your fixed rate period is ending, it is a natural time to review both the rate and the repayment schedule together. Check whether your current or new loan caps extra repayments, because some fixed loans do, and a higher fortnightly amount may count as an extra repayment under your contract.

If you leave a fixed loan before the term ends, a break fee may apply. That fee is charged on ending a fixed rate loan early and is not charged on variable rate loans. Waiting until the fixed term finishes, where it suits you, avoids it.

If your new loan has an offset account or redraw facility, ask how the lender applies balances and when repayments are debited. Those details differ between lenders and can affect how useful the more frequent schedule really is.

Refinance Costs to Weigh Against Any Repayment Benefit

A change in repayment frequency does not make a refinance worthwhile on its own, because switching has costs. Moneysmart lists a discharge or termination fee on closing the old loan, an application fee on the new one, and a break fee if the old loan is fixed.

Fees that apply only because you are ending a loan are restricted for residential loans entered into on or after 1 July 2011, but discharge fees and break fees are not covered by that restriction. Amounts vary by lender, so ask for them in writing early in the refinance process.

If you have less than 20 per cent equity in the property, lenders mortgage insurance may also apply and could add to the cost. A broker has to consider whether the overall savings outweigh these costs and any loss of loan features, and that includes the broker's own fees.

What a Home Loan Health Check Covers on Repayment Frequency

A home loan health check looks at your rate, fees, features and repayment schedule side by side, so you can see whether a change is worth making. For repayment frequency, we compare your pay cycle with your current debit dates and look at what your loan allows.

We also look at your repayment history, because lenders will. Regular on-time payments over a sustained period usually support a straightforward refinance to a lower rate where your circumstances have not changed.

You might even find the loan you have is already suitable, and that a quick change to your schedule is all you need. If you are comparing options across a wider range, our team also covers investment loans and can talk you through each one.

Our Mulgrave mortgage broker team works with homeowners who want clear numbers and a calm conversation before they commit to anything. Call one of our team or book an appointment at a time that works for you, and we will map out what each repayment frequency would look like on your loan.

Frequently Asked Questions