Do you know there are several type of mortgage repayment frequencies ?
You might have heard about the standard monthly payments but what's semi-monthly or accelerated bi-weekly? Which one can save you the most amount in interest and which one can pay your mortgage off sooner?
-Monthly payments are just that, payments made once per month or 12 payments per year.
-Semi-monthly means payments are made on the 1st and the 15th of each month. You are making a total of 24 payments in the year.
-Based on our example,
-Monthly payments works like - $6,979.20 ($581.60 x 12).
-Semi-monthly payments still only add up to $6,979.20. ($290.80 x 24), the same as if you made monthly payments of $581.60.
-Under this repayments option, it will take 25 years to pay off the mortgage in our example.
You might have heard about the standard monthly payments but what's semi-monthly or accelerated bi-weekly? Which one can save you the most amount in interest and which one can pay your mortgage off sooner?
- Lets use this example:
Mortgage Amount $100,000 Interest Rate 5 Amortization Period 25 years Mortgage Payment $581.60
- Monthly Mortgage Payments
-Monthly payments are just that, payments made once per month or 12 payments per year.
-Semi-monthly means payments are made on the 1st and the 15th of each month. You are making a total of 24 payments in the year.
-Based on our example,
-Monthly payments works like - $6,979.20 ($581.60 x 12).
-Semi-monthly payments still only add up to $6,979.20. ($290.80 x 24), the same as if you made monthly payments of $581.60.
-Under this repayments option, it will take 25 years to pay off the mortgage in our example.
- Accelerated Bi-Weekly Mortgage Payments
-Accelerated bi-weekly mortgage payments are a bit different. The difference between semi-monthly payments and accelerated bi-weekly payments is that,
- Semi-monthly payments have 24 payments per year
- Accelerated bi-weekly payments have 26 payments per year.
- You are now making payments every two weeks (26 weeks per year) and not twice per month (24 payments per year).
-To calculate your accelerated bi-weekly payment, take the monthly mortgage payment, divide it by 2 and multiply it by 26 (every 2 weeks).
-Using the example, you're total annual mortgage payment is $7,560.80 (($581.60 / 2 = $290.80) x 26)
-Essentially you're making one more payment per year ($7,560.80 - $6,979.20 = $581.60).
-By making accelerated bi-weekly payments, you will be saving money on interest and reducing you're amortization period.
- What happens to my mortgage?
The following chart shows the impact on you're mortgage between monthly payments, semi-monthly payments and accelerated bi-weekly payments.
If you think this has answered your questions…please leave the feedback and question you have about real estate…I would be more than happy to answer you….
AcceleratedBi-WeeklyMortgage Amount
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