Calgary Mortgage Tips

The advantage of paying bi-weekly accelerated vs monthly

Would you like to cut 5 years off your mortgage?

 By changing your monthly payment to bi-weekly accelerated you can save yourself a lot of money and time. Bi-weekly accelerated  payments will  take your monthly payment, cut it in half and pay it every 2 weeks. You have 26 bi-weekly payments every year, which equals one full months payment that goes straight towards your principal every year.

Let’s say you have a Mortgage amount of $100,000 and your interest rate is 4% over a 5 year term with a 25 year amortization. After 5 years of paying a total of 60 monthly payments your balance would be $87,053.92 and you would still have 20 years remaining. If you chose bi-weekly accelerated payments after 5 years your balance would be $84,116.57 and you would be paying less interest as your balance amount has decreased there for resulting in a shorter amortization. After the first 5 years you would pay an extra $2937.35 straight towards your principal balance.

By paying bi-weekly accelerated payments for the duration of your mortgage you would pay a 25 year mortgage off in 19 years and 7 months based on the numbers I used above.

Would you like to be mortgage free 5 years sooner?

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March 31, 2011 Posted by jackiefrost | Mortgage advice | Leave a Comment