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When do home loan repayments start?

March 13, 2017

In most instances your repayments will start one 'chosen payment cycle' AFTER you settle on the loan.

 

So if your loan settles on the 5th of the month and you chose fortnightly repayments, the first repayment will be one fortnight after settlement.

 

But I said in most instances, right? Sometimes you can nominate the day and date you prefer for your repayments, matching your pay cycle usually, which is really handy, and sometimes the lender requires the repayments to be on a particular day - for example the 1st of the month. This is typically for an interest only loan (which can only be paid monthly).

 

If this happens you may find yourself making one odd short payment which covers the part of the month from settlement till repayment date, and then the normal cycle kicks in.

 

Now as to when SHOULD you make your repayments, well I think the word is out there enough that paying weekly and fortnightly saves you interest so you might be considering paying weekly even if you are paid monthly or fortnightly. In my opinion that means you're holding back money to meet the off sync pay cycle and making life difficult for yourself. Without giving you personal advice, because of course this is education, not a strategy meeting; in this instance I would probably recommend you match your pay cycle for simplicity, and use an offset account for interest savings for the rest of the time. If you're truly concerned you can add 1/12th of a monthly payment to your monthly repayment and use the offset and that would pretty effectively match the savings made from weekly / fortnightly payments.

 

So the good news, you don’t actually start paying the loan until AFTER it has settled – not immediately that it’s approved, phew, and further the interest is always calculated on the outstanding balance & once the interest is covered anything else you’ve contributed comes straight off of the principle – which causes and interest saving and the same repayment next time then means even more coming off the principle… you get the picture, until it’s all paid off. Hopefully sooner rather than later.


Final note on repayments. Although it needs to be avoided the first repayment is often mixed up so don’t panic if it is missed but DO act quickly and get it sorted.

 

Western Weekender article https://issuu.com/weekenderpenrith/docs/wp10march/10

 

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