You may not know this but you have many different options for repaying your mortgage. Typically most people assume that a monthly payment is the only option but you can also make your payments biweekly, or pay off your mortgage quicker with an accelerated biweekly payment.
In this article I'll list each type of repayment and explain how biweekly accelerated payments can save you money and pay off your mortgage quicker.
Most lenders offer the following payment options:
Monthly
Semi-monthly
Biweekly
Biweekly accelerated
Weekly
Weekly accelerated
How do biweekly accelerated payments save you interest over the life of your mortgage?
Let’s look at an example. If your monthly mortgage payment was $1,000/month, the table below demonstrates monthly, biweekly and accelerated biweekly payment options.
Frequency | Payment | Total Annual Payments | |
Monthly | ( 12 x $1000 ) | $12,000 | |
Biweekly | ( $12,000/26 = $461.59 ) | 26 x $461.59 | $12,000 |
Biweekly Accelerated | ( $1,000/2 = $500.00 ) | 26 x $500.00 | $13,000 |
You save money with a biweekly accelerated payment plan because you pay the equivalent of 13 monthly payments per year. On this schedule over the life of your mortgage you will reduce your mortgage amortization from 25 years to 22 years and 3 months.
Weekly accelerated payments are the same as biweekly accelerated, however, you will pay each week instead of biweekly.
By paying a little extra each month you can take a chunk of 3 years off your mortgage, which is a big difference in cost and time. Consider this when you're looking at mortgage options!
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