Guide to Refinancing & Payment Frequency Options

Understanding Payment Frequency When You Refinance Your Home Loan

When you're considering mortgage refinancing, most homeowners in Cobram focus on securing a lower interest rate or accessing equity in their property. However, one often-overlooked aspect of the refinance process is your payment frequency options. The way you structure your repayments can make a substantial difference to how much interest you pay over the life of your loan and how quickly you build equity.

Payment frequency refers to how often you make your mortgage repayments. While monthly payments are the default option most borrowers choose, there are several alternatives that could work in your favour. Understanding these options as part of your home loan refinance journey can help you save money refinancing and improve your overall financial position.

Payment Frequency Options Available When You Refinance

When you refinance your mortgage, you'll typically have several payment frequency options:

1. Monthly Payments - The standard option where you make 12 payments per year
2. Fortnightly Payments - Making 26 payments annually, splitting your monthly amount in half
3. Weekly Payments - Making 52 payments each year, dividing your monthly payment by approximately 4.33

Each option has different implications for your loan amount, the total interest you'll pay, and how quickly you'll pay off your home loan.

How Fortnightly and Weekly Payments Can Save You Money

Here's where payment frequency becomes powerful. When you switch to fortnightly or weekly payments during your refinance application, you're actually making more than 12 monthly payments per year.

For example, if your monthly repayment is $2,000:

• Monthly: 12 payments = $24,000 per year
• Fortnightly: 26 payments of $1,000 = $26,000 per year
• Weekly: 52 payments of $500 = $26,000 per year

This means you're paying an extra $2,000 toward your principal each year without significantly impacting your weekly or fortnightly budget. Over time, this reduces the interest you pay and helps you pay off your loan sooner.

For a $400,000 loan at 6% interest over 30 years, switching from monthly to fortnightly payments could potentially save you over $50,000 in interest and reduce your loan term by several years.

Combining Payment Frequency with Other Refinancing Benefits

When you refinance to a lower rate, combining this with an adjusted payment frequency can multiply your savings. Your refinance interest rates might already be reducing your monthly obligations, but maintaining your previous payment amount through more frequent payments means more goes toward your principal.

Consider these additional features you might access when refinancing:

• Refinance offset account: This allows your savings to offset your loan balance, reducing interest charges
• Refinance redraw: Access to extra repayments you've made while maintaining your payment schedule
• Switch to variable or switch to fixed: Choose the rate structure that suits your circumstances
• Consolidate into mortgage: Combine higher-interest debts into your home loan

When to Consider Changing Your Payment Frequency

Several situations make it particularly worthwhile to review your payment options:

Coming off a fixed rate period: When your fixed rate expiry approaches, it's an ideal time for a loan health check and to restructure your repayments.

Receiving regular income: If you're paid weekly or fortnightly, aligning your mortgage payments with your pay cycle can improve cashflow management.

Wanting to reduce loan costs: When you're focused on paying too much interest and want to accelerate your equity building.

Accessing a lower interest rate: When refinancing to a more favourable rate, maintaining your old payment amount but increasing frequency maximises your savings.

Important Considerations for Cobram Homeowners

Before you move your mortgage or adjust your payment structure, consider these factors:

Budget alignment: Ensure your payment frequency matches your income schedule. If you're paid monthly, weekly payments might not suit your cashflow.

Lender flexibility: Not all lenders offer the same payment options or may charge fees for certain arrangements. This is something to verify during your refinance application.

Property valuation impact: When refinancing, your property valuation affects your loan-to-value ratio, which can influence the rates and features available to you.

Life stage considerations: Your payment frequency choice might differ if you're looking to access equity for investment versus trying to pay down your loan quickly for retirement.

The Refinance Process and Payment Frequency Selection

When you work with Empire Finance Mortgage Brokers in Cobram, the refinance process includes a comprehensive review of your current situation and goals. This includes:

1. Reviewing your current home loan and identifying why refinance makes sense for you
2. Comparing refinance rates across multiple lenders
3. Assessing your income patterns to recommend optimal payment frequencies
4. Calculating potential savings from both lower interest rates and payment restructuring
5. Structuring your application to access the features you need

Flexibility When Your Circumstances Change

One advantage of working with a mortgage broker is understanding that your ideal payment frequency might change over time. Perhaps you start with monthly payments, but when you receive a promotion or pay rise, switching to fortnightly could help you capitalise on that extra income without lifestyle inflation.

Similarly, if you're stuck on a high rate and refinancing provides immediate relief, you might initially choose monthly payments to maximise cashflow, then transition to more frequent payments once you've stabilised your budget.

Making Your Decision

Choosing the right payment frequency when you refinance your home loan isn't about finding a one-size-fits-all solution. It's about aligning your mortgage structure with your financial goals, income patterns, and lifestyle.

Whether you're coming off a fixed rate, looking to unlock equity, or simply want to reduce your interest costs, payment frequency is a tool that deserves consideration alongside interest rates and loan features.

For Cobram residents, having local expertise makes a difference. Understanding regional employment patterns, property values, and lender appetite for the area ensures your refinance application is structured for success from the start.

Call one of our team or book an appointment at a time that works for you. We'll conduct a comprehensive review of your situation and show you exactly how much you could save by optimising both your interest rate and payment frequency.