You have often heard that you're better off making the mortgage payments once a week or every two weeks. How this strategy? - Hypothque To answer this question, you must consider two other ways to make these payments:
1. accelerated weekly payments of 2. minimum weekly payment
The most common method is the weekly payment. It is in fact the monthly payment divided by 4. But in reality, there is no four weeks in a month, but a little more. This method is called the accelerated payment method because it has four additional weekly payments over an entire year and that fact alone increases the payment against the capital of the house (PRT hypothcaire) loan during the year.
The other method is the minimum payment each week. It is the minimum payment that you can make on your mortgage until the end of the amortization period, and the housing loan is fully paid.
It is obvious that the economies of these two different mortgage payments (hypothque) methods are not the same. The minimum weekly payment only increases the frequency of payments 12 times a year to 52 annually, and the increase accelerated weekly payment not only the frequency of payments, but also adds four additional payments.
Let's look at the end of my studies on mortgage payments for these two cases.
The minimum weekly payment
Consider a hypothetical $ 200,000 loan at 5.4%, with a 25-year amortization. This mode of payment would save the borrower $ 1,294.12 over the term of the loan - hypothcaire EPR.
If interest rates were higher, it would save much more. An interest rate of two times mean greater savings 7.08. The borrower has a savings of 43% with once a week instead of paying a payment every two weeks. The interest rate will not affect that.
How can this be?
The explanation is simple, but difficult to put into words. As there is less time between each payment, a portion of the capital is repaid a few days earlier, which reduces faster interest rate on the amount refunded. The savings for each payment is low, but increases significantly over time.
Conclusion: The more often you make payments, the more savings, even if you do not increase the amount paid. If possible, make payments every week, if not, pay your mortgage every two weeks - Hypothecaire EPR.
The weekly payment
If you decide to make payments with the accelerated weekly payment, it will increase the payment by $ 23.25 per week over the $ 200,000 mortgage (at 5.4%, amortized over 25 years).
With this scenario, the mortgage is paid on a 1107, 21.3 years and the total savings will equal $ 28,173.78 i (see calculations at end of article.)
The only exception to this rule would be if you have a fixed or guaranteed investment that is paying interest of 7.52% per year before taxes.
It is important to choose the best method of payment of your mortgage, but the most critical thing of all is to choose the best mortgage strategy.
Notes: If someone buys a house for $ 200,000 (with a rate of 5.4%) and pays a monthly ($ 1209.16 per month), he will have paid $ 362,749.83 after 25 years ($ 200,000 more in 162,749.83 interest) and secondly, with accelerated weekly payments ($ 302.29 per week), he will have paid $ 334,576.05 ($ 134,576.05 $ 200,000 plus interest) in 1107 weeks of our 21.3 years. This is a savings of $ 28,173.78 ($ 362,749.83 - $ 334,576.05) to pay the mortgage itself. Gregory is an Accredited Mortgage Professional (AMP). For more information on mortgages - hypothcaire prt, please visit: Informezvous.com - hypothque