Posted on: 03rd Jun, 2009 03:32 pm
Does paying weekly save more on interest than bi-weekly?
Hi tbgaspard,
A bi-weekly mortgage saves a lot of money in interest. Its advantage over the regular mortgage is that you will be able to pay off the mortgage faster and will thus pay less interest over the life of the loan. While making monthly payments, you make 12 payments annually. While using bi-weekly payments, you make 26 payments over a time period of 52 months in a year. Thus, you make one month's extra payment in full towards principal every year, which reduces the loan balance.
A weekly mortgage, similarly, helps you pay off your debts even faster. By making payments on a weekly basis, you make a total of 52 payments in a year. This reduces the principal balance faster and this, in turn, reduces the total amount of interest which is calculated on the principal balance owed.
A bi-weekly mortgage saves a lot of money in interest. Its advantage over the regular mortgage is that you will be able to pay off the mortgage faster and will thus pay less interest over the life of the loan. While making monthly payments, you make 12 payments annually. While using bi-weekly payments, you make 26 payments over a time period of 52 months in a year. Thus, you make one month's extra payment in full towards principal every year, which reduces the loan balance.
A weekly mortgage, similarly, helps you pay off your debts even faster. By making payments on a weekly basis, you make a total of 52 payments in a year. This reduces the principal balance faster and this, in turn, reduces the total amount of interest which is calculated on the principal balance owed.
yes. it is as interest calculation depends upon duration & principal. since you are paying at higher frequency, principal applicable will reduce faster
yes its good
Just make **absolutely certain** that your payments are being properly credited. Some entities, especially some mortgage servicers, like to put any additional amounts received into "suspense" accounts instead of applying them to the principle. Any amount that you send in over and above your regular monthly payment should be accompanied by strict instructions as to how the additional monies should be applied to your loan. In fact, before you embark on this endeavor- which, in theory, is an excellent one - you may want to read through your mortgage and see if any mention of how any "overage" will be handled by your servicer/note holder. IF there are no explicit terms addressing the issue in your mortgage you may want to contact your servicer/note holder before sending any additional monies to see if they have any preferred method of handling this. Most likely, they'll attempt to talk you out of doing it because they'll end up losing money on you.
Regardless, make sure that you have records of the payments each and every month, preferably in the form of a canceled check although those are rapidly going the way of the dodo. You may also want to consider sending your payments either with delivery confirmation or return receipt requested to ensure that you can prove that the payments were received. Nothing worse that sending a check out on time and not being able to prove that it was RECEIVED on time.
Also, something that every borrower should consider doing - coordinating your payment amounts with the month that the payment was made i.e. if your regular payment is $1004.43/month. Round it up to $1005.10 for October's payment, $1005.11 for November, $1005.12 for December, etc. That way it makes it that much easier to track payments and see where each one should have been applied.
Regardless, make sure that you have records of the payments each and every month, preferably in the form of a canceled check although those are rapidly going the way of the dodo. You may also want to consider sending your payments either with delivery confirmation or return receipt requested to ensure that you can prove that the payments were received. Nothing worse that sending a check out on time and not being able to prove that it was RECEIVED on time.
Also, something that every borrower should consider doing - coordinating your payment amounts with the month that the payment was made i.e. if your regular payment is $1004.43/month. Round it up to $1005.10 for October's payment, $1005.11 for November, $1005.12 for December, etc. That way it makes it that much easier to track payments and see where each one should have been applied.
All good advice above.
A weekly payment would pay off faster than a bi-weekly.
I have never seen a lender in my 20+ years that would accept weekly payments.
Paying weekly will pay off faster than bi-weekly, but, not as much as you might think.
If one pays extra one twelfth of a mortgage payment once a month, it only pays off 3 to 4 months longer than a bi-weekly. To pay weekly is probably another couple months---you are paying earlier but are still only maing one extra payment per year--same as a bi-weekly.
The lower the interest rate, the slower it pays off. If your mortgage rate were around 10% to 11%, you would pay off in 21 years and six months with a bi-weekly. Rates are low now. If your rate is 5.500%, a bi-weekly pays off in 5.9 years.
A weekly payment would pay off faster than a bi-weekly.
I have never seen a lender in my 20+ years that would accept weekly payments.
Paying weekly will pay off faster than bi-weekly, but, not as much as you might think.
If one pays extra one twelfth of a mortgage payment once a month, it only pays off 3 to 4 months longer than a bi-weekly. To pay weekly is probably another couple months---you are paying earlier but are still only maing one extra payment per year--same as a bi-weekly.
The lower the interest rate, the slower it pays off. If your mortgage rate were around 10% to 11%, you would pay off in 21 years and six months with a bi-weekly. Rates are low now. If your rate is 5.500%, a bi-weekly pays off in 5.9 years.
