Increase the Frequency of Your Mortgage Payments

How would changing the frequency of my mortgage payment affect my mortgage?

If you’re making your mortgage payment monthly, consider about making your payment bi-weekly instead (or paying weekly instead of bi-weekly).

By making a mortgage payment every two weeks, instead of once a month, you pay the same amount per month – but you will end up paying less interest. Why? Because that’s two weeks a month that you’re not paying interest on half of your monthly payment. Over the year you’ll make the equivalent of one extra monthly payment (because instead of twelve monthly payments, you’ll make 26 bi-weekly payments…the equivalent of thirteen monthly payments).

For example:

Let’s compare how changing the frequency of the mortgage payments affects the interest savings on a $200,000 mortgage with a 5-year fixed rate term, a rate of 5.39%, and an amortization of 25 years.

The monthly payment is the same – $1,208 – but with the accelerated bi-weekly payments you would pay $604 every two weeks instead of $1,208 once a month. By choosing accelerated bi-weekly payments, you will have saved $971.10 in interest, by the end of the five-year term. Also you will have paid down $7,010.50 more off your principal than if you were only making monthly payments. The savings with weekly payments are even greater!*

First Foundation would happy to calculate the possible savings for you!

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*Calculations are estimates.

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Last updated Oct 29, 2014