Is it better to pay your mortgage weekly, every two weeks, or monthly? - prêt hypothecaire

You have often heard it said that you are wiser to make mortgage payments once a week or every two weeks. How does this strategy ? - hypothèque

To answer this question, you have to examine the two different ways of making these payments:

1. accelerated weekly payment 2. minimum weekly payment

The method that most people use is the accelerated weekly payment method. With this way, the standard monthly payment is divided by 4. When you examine this, you will realize that you are really remitting more payments than you would otherwise in a year. There are more than 4 weeks in a month, so with this method, you end up paying an extra 4 payments per year on your mortgage - prêt hypothecaire.

You can see right away that the savings from these two methods will not be the same. The minimum weekly payment (hypotheque) increases the frequency of payments from 12 times annually to 52 times annually, while the accelerated weekly payment method actually ADDS 4 extra payments to the number of payments, in addition to increasing the amount of payments.

We can look at my studies of these two methods of mortgage payments.

The minimum weekly payment

On a $200,000 mortgage, with 5.4% interest and an amortization period of 25 years, the savings is $1,294.12 compared to a monthly payment. The higher the interest rate, the higher the savings, by a large margin - prêt hypothecaire. An interest rate of double that amount would give a savings that is 7.08 times larger.

The home owner will have a 43% savings if he pays his loan every week instead of once every two weeks. The rate of interest is not affected by this.

How is this possible?

There is a simple explanation, but explaining it is not easy. There is less time between each payment, therefore a capital portion of the loan is constantly being repaid a few days earlier. This reduces the interest paid on the outstanding portion. Even though this savings is small for each payment, the overall cumulative total is large.

Findings: The more payments that are remitted, the more you will save on your mortgage, even if you do not increase the amount being paid. So, make your payment each week to get the most savings. If you can’t do this, at least do it every two weeks.

The accelerated weekly payment

An accelerated weekly payment will increase the payments on a mortgage by $23.25 per week on the $200,000 mortgage, amortized over 25 years at 5.4%. In this case, the home will be paid for in 1,107 payments, or 21.3 years. The total savings will total $28,173.78i (please refer to the calculations at the end of the article.)

However, it is better not to make accelerated payments if you have a fixed or guaranteed investment that pays 7.52% annually before taxes.

Choosing the best method of paying down your home loan is important, but not as important than choosing the best mortgage strategy.

Notes : If someone buys a home for $200,000 (with a rate of 5.4%) and pays it once a month ($1,209.16 a month), he will have paid $362,749.83 after 25 years ($200,000 plus $162,749.83 in interest); on the other hand, with accelerated weekly payments ($302.29 per week), he will have paid $334,576.05 ($200,000 plus $134,576.05 interest) in 1,107 weeks our 21.3 years. This is a savings of $28,173.78 ($362,749.83-$334,576.05) to pay the same mortgage.

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