Understanding Payment Frequency When You Refinance Your Home Loan
When you're considering a home loan refinance, most people focus on finding a lower interest rate or accessing equity. But here's something many Balmoral homeowners overlook: your payment frequency can make a substantial difference to how much interest you pay over the life of your loan.
Whether you're coming off a fixed rate period or simply looking to reduce loan costs, understanding payment frequency options during the refinance process could help you save money refinancing and improve your cashflow at the same time.
What Are Payment Frequency Options?
When you refinance your mortgage, you'll need to choose how often you make repayments. Most lenders offer several options:
- Monthly repayments (12 payments per year)
- Fortnightly repayments (26 payments per year)
- Weekly repayments (52 payments per year)
While monthly payments might seem straightforward, switching to more frequent payments can work in your favour. Here's why: when you pay fortnightly or weekly, you're actually making more repayments each year, which reduces the principal balance faster and cuts down the interest charged over time.
How Payment Frequency Affects Your Interest Costs
Let's look at a practical example for Balmoral residents. Say you have a loan amount of $600,000 with a variable interest rate of 6.5%. If you pay monthly, you'll make 12 payments. But if you split that monthly amount in half and pay fortnightly, you'll make 26 payments - which equals 13 monthly payments worth over the year.
That extra payment goes straight towards reducing your principal, meaning less interest accumulates. Over a 30-year loan, this could save you tens of thousands of dollars in interest charges.
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Book a chat with a Finance & Mortgage Broker at LBK Lending today.
Choosing the Right Payment Frequency During Your Refinance Application
When you're working through your refinancing refinance application with LBK Lending, consider these factors:
Your Income Schedule: If you're paid weekly or fortnightly, aligning your loan repayments with your pay cycle makes budgeting more manageable. You're paying your mortgage when money hits your account, which can improve cashflow.
Your Financial Goals: Are you looking to pay off your home faster? Weekly or fortnightly payments accelerate your loan reduction. Want to potentially access a lower interest rate while also shortening your loan term? Payment frequency is part of that strategy.
Cash Flow Management: More frequent payments in smaller amounts can feel more manageable than one large monthly payment, particularly for families managing multiple financial commitments.
Combining Payment Frequency with Other Refinance Features
When you refinance to a lower rate, you can stack multiple features to maximise your savings:
Offset Accounts: A refinance offset account holds your savings and reduces the loan balance that interest is calculated on. Combined with fortnightly or weekly payments, this becomes even more powerful.
Redraw Facilities: Make extra repayments through your refinance redraw facility while maintaining flexibility. If you're paying fortnightly and occasionally have extra funds, you can contribute more and access it later if needed.
Fixed vs Variable Options: Whether you switch to variable or switch to fixed, payment frequency remains a choice. Some borrowers like to lock in a rate with fortnightly payments to maximise their strategy.
When to Review Your Payment Frequency
A loan health check isn't just about interest rates - it's about your entire loan structure. Consider reviewing your payment frequency when:
- Your fixed rate period is ending and you're comparing current refinance rates
- Your income situation changes (new job, promotion, or income structure change)
- You're looking to release equity in your property or access equity for other purposes
- You want to consolidate into your mortgage and need to restructure repayments
- You're stuck on a high rate and the refinance process offers a chance to restructure everything
The Balmoral Advantage: Local Property Market Considerations
Balmoral's property market has unique characteristics that make refinancing strategies particularly relevant. With property valuations in the area, many homeowners have substantial equity built up. When you access equity to release for your next purchase or unlock equity for renovations, structuring your repayments smartly becomes even more important.
If you're considering a cash out refinance to buy an investment property, adjusting your payment frequency on your primary residence can help maintain healthy cashflow while building your portfolio.
Making the Switch: What to Expect
When you move your mortgage during the refinance process, your new lender will ask about your preferred payment frequency. This is your opportunity to:
- Review your current payment structure
- Consider your household budget and pay cycles
- Calculate potential savings with different frequencies
- Choose the option that aligns with your goals
The refinance process typically takes a few weeks, and during this time, LBK Lending can help you model different scenarios to see which payment structure works for your situation.
Why Refinance Now?
If you're paying too much interest on your current loan, wondering when to refinance, or your fixed rate expiry is approaching, now might be the right time for a loan review. Even if you're not accessing a lower interest rate, restructuring your payments could still deliver savings.
Many Balmoral homeowners who compare refinance rates discover they can save thousands just by combining a slightly lower rate with a changed payment frequency. Whether you want to access equity, reduce your loan term, or simply improve your monthly cashflow, payment frequency is a tool worth considering.
Taking the Next Step
Refinancing your home loan involves multiple decisions, and payment frequency is one aspect that deserves attention. At LBK Lending, we work with Balmoral residents to review all aspects of their loan structure - from interest rates to repayment schedules and features that match your lifestyle.
If you're coming off a fixed rate, looking to unlock equity, or simply want to know why refinancing might work for you, understanding your payment options is part of building a mortgage that serves your goals.
Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and discover how payment frequency choices could help you save money on your home loan.
