Aside from paying a regular monthly mortgage payment there are other choices you’ll be presented with when approved for a mortgage. This article will explain the differences and benefits of changing your payment schedule.
The goal is to pay down your mortgage as quickly as possible and save on interest. The longer it takes to pay down the more interest you’ll end up paying in the end. You’ll soon discover how choosing an accelerated payment is the best way to go.
Typical mortgage re-payment options:
Monthly: Your typical payment. With this option your payment will be the least amount and the mortgage will be re-paid the slowest. This may be more comfortable for some people as its only one payment a month to think about and plan for.
Bi-Weekly: Your 12 Monthly payments divided by 26. You would pay a payment every 2 weeks for a total of 26 payments per year.
Accelerated Bi-weekly: Your monthly payment divided by 2. This way you end up paying 2 extra payments a year the same as paying 13 monthly payments per annum.
Semi-Monthly: Making payments twice a month for a total of 24 payments a year. This will not help to pay your mortgage off any sooner than regular monthly payments.
Weekly: Taking your monthly payments for the year and dividing by 52 weeks. This will not pay down your mortgage any sooner.
Accelerated Weekly: Taking your monthly payment and dividing it by 4. You’ll end up paying the equivalent of 13 monthly payments in one year.
Here are some examples using a $250,000 mortgage at 2.44% over 5 year term, compounding semi-annually with a 25 year amortization.
You can see how choosing the accelerated option pays your balance down a lot faster than regular payments.
If you would like more information on how you can save on your mortgage payments, contact a mortgage professional at Dominion Lending Centres.
Courtesy of Danielle Spitters, AMP – DLC Valley Financial Specialists