Advantage of Frequent Payments
Paying off your mortgage is a more flexible process than you may think. By taking advantage of options that allow you to pay more frequently, you will pay the mortgage faster and save thousands of dollars on interest.
Most lenders offer a bi-weekly mortgage payment plan, where you make a half payment every two weeks instead of a full payment once each month. By paying bi-weekly you make twenty-six half payments each year (equal to thirteen full payments) – one more than you would make by sending the lender traditional monthly payments.
Every dollar of that extra payment goes towards reducing the principal balance of your loan, the balance that future interest calculations are based on. As you reduce the principal, you reduce the total interest paid and the length of time it takes to pay the loan.
As per the example below you would shave 4 years off a 25 year amortized loan, or almost 7.5 years off a 35 year amortized loan.
|
Payment Rate
|
Payment Amount
|
Years to Pay Off Mortgage
|
Estimated Interest Paid over the Mortgage’s Lifetime
|
|
Monthly
|
$639.81
|
25 years
|
$91,940.85
|
|
Bi-Weekly
|
$319.91
|
21 years
|
$74,922.45
|
|
|
|
Monthly
|
$565.25
|
35 years
|
$137,407.78
|
|
Bi-Weekly
|
$282.63
|
27.65 years
|
$103,465.73
|
This example is based on a $100,000 mortgage with a 6% interest rate calculated semi-annually, not in advance, and assumes that the interest rate remains constant for the full 35-year amortization period.
*A 40-year amortization period is available on select conventional mortgages only.
Advantage of Frequent Payments
Paying off your mortgage is a more flexible process than you may think. By taking advantage of options that allow you to pay more frequently, you will pay the mortgage faster and save thousands of dollars on interest.
Most lenders offer a bi-weekly mortgage payment plan, where you make a half payment every two weeks instead of a full payment once each month. By paying bi-weekly you make twenty-six half payments each year (equal to thirteen full payments) – one more than you would make by sending the lender traditional monthly payments.
Every dollar of that extra payment goes towards reducing the principal balance of your loan, the balance that future interest calculations are based on. As you reduce the principal, you reduce the total interest paid and the length of time it takes to pay the loan.
As per the example below you would shave 4 years off a 25 year amortized loan, or almost 7.5 years off a 35 year amortized loan.
|
Payment Rate
|
Payment Amount
|
Years to Pay Off Mortgage
|
Estimated Interest Paid over the Mortgage’s Lifetime
|
|
Monthly
|
$639.81
|
25 years
|
$91,940.85
|
|
Bi-Weekly
|
$319.91
|
21 years
|
$74,922.45
|
|
|
|
Monthly
|
$565.25
|
35 years
|
$137,407.78
|
|
Bi-Weekly
|
$282.63
|
27.65 years
|
$103,465.73
|
This example is based on a $100,000 mortgage with a 6% interest rate calculated semi-annually, not in advance, and assumes that the interest rate remains constant for the full 35-year amortization period.
*A 40-year amortization period is available on select conventional mortgages only.