I know that it is more beneficial to pay my P&I weekly instead of monthly.
My question is around how the bank calculated my repayments.
I thought it would have been my current monthly repayments of $3,236 x 12 months divided by 52 weeks = $747 per week.
The bank took my $3,236 and divided it by 4 = $809 per week. That is a difference increase of $62 per week or $3,224 per year.
I know I am paying more principle but am I paying more interest than I should be?
Am I better off in this example with monthly or weekly repayments? Thank you in advance.Mathematical error!
That is a difference increase of $62 per week or $3,224 per year.
Because 4*12 = 48 weeks. But previous equation you divided it by 52 weeks. Therefore extra 4 weeks = A$3224 = correctIt should not have any problem as interest is calculating daily.
Sounds like Cba.
The issue is that not all banks computer systems recognize weekly / fornightly repayments. CBA only has monthly in their contracts.
This is why Cba fornightly payments are actually the monthly payment devided by two. You are simply in advance for the first half of the month / paid in full by month end. Due to this you pay an extra repayment each year (26 payments). The loan comes down a few years so it is no longer a true 30 year term.
BankWest for example have a more modern system. They calculate true 30 year terms based on fortnightly repayments. The loans have actual calculated fortnightly repayments for a 30 year term. The extra annual payment does not exist with this option therefor the only benefit is approx 2 weeks offset of your repayment per month.
I’ll work ou the offset benefit and post an example. Offset benefit is bugger all ( another banking myth)…
PS. You are not comparing apples with apples. You are looking at different loan terms.
We are with CBA, and, as Banker said, they just divided the monthly payment by 2 to calculate our fortnightly repayment.
It doesn't worry us as we will be effectively paying 13 months a year instead of 12, and paying it off quicker.
Hi Craig.
The method you mention IS the best way to pay of a homeloan – assuming it is contracted as monthly payments. THe only way you get the 'true' fortnitely payment you mention, is if the loan is actually contracted fortnitely or weekly instead of monthly – (not something I recommend, but many people 'demand' as a result of misunderstanding how things work. If you do not like the repyamnets how they are set up, simply just have the monthly contracted loan payment amount come out ….monthly!. You wont pay it off any quicker, but you will be making payments 'effectively' as you wish.
Cheers
If you have an offset account, it does not matter when your repayments are made, pay them monthly or weekly for your own convenience. There is no benefit or lose either way.
Thanks for all your comments
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