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Marthas Vinyard » Marthas Vinyard Semi-weekly Newspaper

Why Should I Choose Bi-Weekly or Weekly Over Monthly Mortgage Payments

When you purchase a property and arrange a mortgage with a bank or other lending institution, one of the decisions you will make will be to decide the frequency of your mortgage payments.

The most common options are weekly (mortgage payments are made once a week, i.e., every Friday), bi-weekly (every second Friday), monthly (the 1st day of each month) or semi-monthly (the 1st and 15th of each month).

When you choose monthly mortgage payments, you will make one mortgage payment every month for 20 or 25 years, until your mortgage has been paid in full. For example, if you arrange a mortgage for $200,000.00 at 6% interest, you will make monthly mortgage payments of $1,279.61 every month for 25 years.

Semi-monthly mortgage payments are similar to monthly mortgage payments, where you make 2 mortgage payments per month, each and every year for 25 years. In the above example, you would have semi-monthly mortgage payments of $639.80 for 25 years.

If you have any interest at all in paying off your mortgage earlier than 25 years, you might want to consider choosing bi-weekly mortgage payments instead of monthly. Most people who choose bi-weekly mortgage payments, usually have the payment coincide with when they get paid. If you get paid every second Friday, you can have your bi-weekly mortgage payment come directly out of your bank account every second Friday, as well. One obvious benefit to this is that you will always have the money in your account to make your mortgage payment.

Another benefit to this frequency choice is that is allows you to pay off your mortgage sooner rather than later. For example, if you arrange a mortgage for $200,000.00 at 6% interest, you will make bi-weekly mortgage payments of $639.80, but your will only make those payments for 21.1 years. You actually save yourself 3.9 years of mortgage payments, or approximately $64,876.23!

One thing to remember, though, is that you will be making two extra mortgage payments every year. This is why choosing bi-weekly saves you so much time and money. On those months when you get three paycheques (happy day!), you actually make three mortgage payments. So, while unfortunately all of your extra pay is not free for you to spend, some of it is and some of it is saving you serious money in the long run.

Weekly mortgage payments act the same as bi-weekly mortgage payments. Your mortgage payments are half as much as your bi-weekly payments, and you make four extra payments per year, resulting in the same savings of time and money as in the bi-weekly example.

Imagine having an extra $64,876.23 to spend, or almost 4 years of not having to make a mortgage payment. What will you do with all of that extra money?

Barb Asselin is a college professor, author and owner of Asselin Group, an online publishing company. For more articles relating to real estate, visit http://ontarioproperty.asselingroup.com or visit http://www.asselingroup.com/ebooks-internet.htm for articles and ebooks relating to starting an online business. Visit http://www.asselingroup.com to see all that Asselin Group has to offer, including municipal directories, internet business ebooks and articles, recently published articles, information regarding real estate and sign language ebooks.

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