Not in New Zealand. The theory is you make 2 extra payments a year, which should shave 5 years off a 25 year mortgage.

 

The reality is that nearly all lenders simply recalculate your payments so that you pay the same amount a year, whether you pay weekly, fortnightly or monthly.

 

Go to any Bank Web Page and ask it to work out monthly payments on $150,000 at 8.50%.

 

The answer is $1,207-84 per month x 12 = $14,494-08 pa

 

Do the same again except ask for fortnightly payments.

 

The answer is $557-46 per fortnight x 26 = $14,493-96 pa.

   

Fortnightly Payments v Monthly
	Amount	Interest Rate	Term	Payment	Payments pa	Annual Payment
Monthly	$     150,000	8.50%	25 years	$1,207.84 pm	12	$       14,494.08
Fortnightly	$     150,000	8.50%	25 years	$   557.46 f/n	26	$       14,493.96
				Difference pa		$                 0.12
				Difference after 25 years		$                 3.00

 

 

That's a difference of $0-12c a year.

 

Over a 25 year period that's a total saving of $3.  Not very exciting is it?

 

Don't worry

 

Mfree has an option that does give you the equivalent of 2 extra payments a year.

 

On the same $150,000 mortgage this could save $52,239 and shorten the term by 5.25 years.

 

Now that's a lot better!