The calendar trick saving Aussies $80k on their home loans
We'd love to thank Lucy for including our comments in this article for @yahoofinance
Australian home owners could save as much as $80,000 over the life of their loan by changing the frequency of their repayments, a mortgage broker has revealed.
Instead of paying in monthly instalments, Australian borrowers should consider switching their repayment schedule to weekly or fortnightly payments, mortgage broker and founder of Two Red Shoes Rebecca Jarrett-Dalton told Yahoo Finance.
That’s because interest is calculated daily, so making more frequent repayments will save on interest. And as banks will generally calculate monthly repayments based on a four-week month, paying weekly will actually see you pay off your home loan faster, as there is only one month that actually has only four weeks, Jarrett-Dalton said.
Jarrett-Dalton said she’s seen borrowers making this switch save as much as $80,000 over the life of a loan.
“You’ve got the compounding effect of having paid one-twelfth extra every year as well as getting the money in there sooner – and the sooner you can lower your balance, the more interest you’re saving,” Jarrett-Dalton said.