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 of us use is the accelerated weekly payment method. With this way, the standard monthly payment is divided by 4. When you understand 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 - hypoth?que.

It is clear that the savings from each of these two mortgage payment (pr't hypothecaire) methods is not the same. The minimum weekly payment only increases the frequency of the payments from 12 times a year to 52 times per year, and the accelerated weekly payment increases not just the frequency of payments, but also adds 4 additional payments.

Let's look at the result of my studies on mortgage payments for these two cases.

The minimum weekly payment

Let us use a hypothetical loan of $200,000 at 5.4%, with a 25 year amortization period. This method of payment would save the borrower $1,294.12 over the life of the loan - pr't hypoth?caire.

If the interest rate were higher, his savings would be substantially higher. An interest rate of twice as much would yield a savings 7.08 greater.

The borrower will have a 43% savings with a once a week payment instead of a once every two weeks payment. The rate of interest will not affect this.

How can this be?

The explanation is simple, but difficult to put into words. Since there is less time between the payments, one part of the capital is paid down a few days earlier, which more rapidly reduces the interest paid on the amount that is repaid. The savings is minimum for each payment but increases dramatically over time.

Conclusion: The more often you make the payments, the greater the savings, even if you do not increase the amount paid. If it is possible, make your payments each week, if not, make them every two weeks - pr't hypothecaire.

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 accumulated savings will be $28,173.78i (please refer to the calculations at the end of the article.)

However, you are better off not to make accelerated payments if you have a fixed or guaranteed investment that pays 7.52% per year before taxes.

Yes, it is imperative to choose the best payment method for your mortgage, but the really important thing is to choose the best mortgage strategy for your circumstances.

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.