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Mortgage Payment Options That Can Save You Money

Guest post by: Brian King

Article Overview: The not accelerated version of the bi-weekly mortgage payment option does not end up saving you lots of money like the accelerated version.

Mortgage Payment Options That Can Save You Money

The not accelerated version of the bi-weekly mortgage payment option does not end up saving you lots of money like the accelerated version. Instead all it does is split up the monthly payments differently. Payments are still made on the same schedule as the accelerated bi-weekly payments would be. However, instead of paying half a months payment (in our ongoing example’s case $600) a borrower would rather be making payments for the following amount: the $1200 payment is multiplied by 12 and then divided by 26 so that the payments can be spread out over the two week periods throughout the whole year, however, the amount they actually pay off adds up to the normal total of $14400/year. So you have not saved any money on your mortgage this way. But you do end up making “smaller” payments every two weeks than the traditional bi-weekly accelerated payments. And the main reason people choose this option is to match up payments with their paychecks and to keep the payments lower for each paycheck compared to the monthly and accelerated mortgage payment options.

There is still another mortgage payment option out there in regards to the frequency of your mortgage payments. This option is known as Weekly payments. These are very similar to bi-weekly payments by the fact that the accelerated version of the weekly payments will end up saving you a lot of money in regards to your mortgage. While the not accelerated version of the weekly payments will simply evenly split up your monthly payment across the weeks of the year.

So for accelerated weekly payments they are the exact same as bi-weekly accelerated payments, except the fact that the payments will occur on the same day of every week and the amount will be ¼ of your monthly payment total. So if your payments are still made on Fridays than you will pay ($1200/4) $300 a week (on Fridays) for 52 weeks which equals $15600 and again has deducted an additional $1200 from your mortgage for the year by choosing this option. So in the same way that bi-weekly payments find those extra couple times a year you are sending an extra payment to the bank, the weekly accelerated option will also have you paying for 5 week months at least 4 times a year, getting you that extra savings.

And for not accelerated weekly payments the process is going to be the same as the bi-weekly not accelerated, except that the $1200 monthly payment is going to be multiplied by 12 and then divided by 52 (not 26) providing a way to spread the $14400 yearly amount to be spread into weekly payments of $276.93. The benefits of this option are the same as the bi-weekly not accelerated payment option ones.

The chart below compares the interest saved and time it takes to pay off a 25 year mortgage (original amortization period) when looking at different mortgage frequency of payment options (monthly, semi-monthly, bi-weekly - accelerated, weekly-accelerated) in regards to a mortgage of $142,772.35 at 7%. (And the math has been changed from the $1200 monthly payment amount to a $1000 one.) The not accelerated versions of the bi-weekly and weekly will be almost the exact same in regards to savings as the monthly option.

	Monthly	Semi-Monthly	Bi-Weekly	Weekly
Payment	1000	500	500	250
Years (amortization period)	25	24.92	20.58	20.5
Interest Paid	157227.49	156085.48	124238.29	123850.05
Interest Saved	0	1142.01	32989.20	33377.44

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Article Tags: biweekly mortgage payment, Canadian Mortgages, mortgage products, payment option
Referred by: http://www.searchengineworkshops.com



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