There’s a common belief among homeowners that paying your 30-year principal and interest mortgage weekly instead of monthly will help you pay it off faster. While this idea has some merit in certain cases, the reality is that the timing of your payments alone doesn’t inherently accelerate your mortgage repayment. Let’s unpack why.
Weekly vs Monthly Payments
The difference lies in how your lender calculates your repayments. Most New Zealand banks calculate your minimum mortgage repayment as a fixed monthly amount, based on your loan term, interest rate, and balance. If you choose to pay weekly or fortnightly, this monthly amount is divided into smaller portions (e.g., 1/4 for weekly payments or 1/2 for fortnightly payments).
If you’re simply making these regular weekly or fortnightly payments without increasing the overall amount, you’re not paying any more than you would if you paid monthly. As a result, your loan balance decreases at the same rate, and you don’t pay off the mortgage any faster.
The Real Way to Pay Off Your Mortgage Faster
What truly matters is making extra payments above your required minimum. For example, if your monthly repayment is $2,000, switching to weekly repayments of $500 (1/4 of the monthly amount) doesn’t add any extra to your principal. However, if you voluntarily increase your weekly payments to, say, $600, the extra $100 will go directly towards reducing your loan balance, saving you interest over time.
Key Takeaway
Switching to weekly payments doesn’t inherently shorten your loan term unless you pay more than your minimum required amount. If your goal is to become mortgage-free faster, focus on increasing your repayments, not just their frequency. Discuss your options with us to ensure your strategy aligns with your financial goals.”