How often should I make repayments?


With the advent of offset, it no longer matters how often you make repayments because all of your day to day funds are already working to save you mortgage interest on a daily basis. Making a mortgage payment simply moves funds out of the offset and into the home loan which, from an interest point of view is neutral. To explain further, let’s say your repayment is $1000, that sum was in the offset account anyway, moving it to the loan is simply shuffling funds. The interest saving benefit is the same.

I am often asked whether a client with a split fixed and variable loan should pay extra to the fixed because that does not have offset and I reply saying the same as above, taking funds out of the offset, which were in there saving interest on the variable loan, is simply shuffling funds into the loan account. Once transferred they are no longer saving interest on the variable loan they are now saving interest off the fixed portion. One point to note is if the fixed loan is a higher interest rate than the variable you could potentially save more by paying that loan off at a faster rate but you don’t know what rates are going to do for the rest of the fixed term. If variable rates rise you are going to wish you hadn’t paid so much off the fixed because you can’t get those funds back and move them to the variable loan. There is also no redraw on a fixed loan, in most cases.

The only time you would pay as often as possible is if you have a basic variable loan product without offset, but those products are less popular these days.