As a mortgage solution, many advisors will suggest you to move from monthly to bi-weekly payments to help pay off your mortgage faster, however; this mortgage solution may not have as much of an impact as you’d think. A mortgage solution where you move to bi-weekly payments may save you a little money over the life of a 35 year mortgage, but it usually only saves you pennies during the first 5 year term!
A mortgage solution, where you move to accelerated bi-weekly payments means you’re still making 26 payments per year, but you increase the amount of your bi-weekly payments to the same amount they’d be if you were paying semi-monthly.
You may be asking…how is this possible? The acceleration of your payments allows more of your money to go towards cutting down the principal, as opposed to covering interest. The extra cost per month is minimal, but the savings are HUGE!
For example, based on a $300,000 mortgage at 4.99% with a 35 year amortization, the accelerated bi-weekly payment option would save you $8,624.17 after the first 5 year term.
When you add accelerated bi-weekly payments to a lump-sum payment strategy; you’ve found yourself a very economical, realistic and effective mortgage strategy.
We at MonsterMortgage.ca know math isn’t always the most entertaining of subjects, but we’d be glad to do your math for you. You will be quite surprised as to how much money you’ll be able to save!BACK TO BLOG FEED