If paying off your mortgage sooner sounds appealing, than accelerated bi-weekly mortgage payments might be just the ticket. Accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off faster, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.
Here’s how it works:
Let’s say you have a mortgage of $100,000, an interest rate of 5.00% and an amortization period of 25 years. Your monthly mortgage payment would be $581.60 and your total payments for a year would be ($581.60 x 12) $6,979.20.
To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 / 2 = $290.80). Then take that payment and multiple it by 26 to arrive at your total of all payments for the year ($290.80 x 26 = $7,560.80).
There’s the difference. Using the monthly mortgage payment plan, you’ve made a total of $6,979.20 worth of payments for the year, while using the accelerated bi-weekly mortgage plan you’ve made $7,560.80 worth of payments, a difference of $581.60. Basically with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment in the year.
Looking for more information on accelerated bi-weekly mortgage payments or ways to pay off your mortgage faster don’t hesitate to contact me anytime.