Example - Interest savings resulting from various payment options*
| |
Payment |
Frequency |
|
Interest paid |
Interest saved |
|
Monthly |
$1,000 |
Every Month |
25 years |
$150,060 |
-- |
|
Semi-Monthly |
$500 |
24 times a year |
25 years |
$149,660 |
$400 |
|
Bi-Weekly |
$460 |
26 times a year |
25 years |
$149,630 |
$430 |
|
Weekly |
$230 |
52 times a year |
25 years |
$149,455 |
$605 |
|
Accelerated weekly |
$250 |
52 times a year |
20.6 years |
$120,300 |
$29,760 |
|
Accelerated
bi-weekly |
$500 |
26 times a year |
20.7 years |
$120,650 |
$29,410 |
Example - Interest savings resulting from various payment options*Example - Interest savings resulting from various payment options*
*Note: For illustration purposes, numbers in this example are rounded. Each institution may have a slight difference in interest calculations. Interests paid and saved were calculated over the amortization of the mortgage.
MonthlyWith monthly payments, the funds are taken from your account on a specified day once a month (or 12 times a year), for example, the first day of every month. This type of payment does not result in any interest savings when compared to the other payment options noted below.
Semi-monthlyIf you choose the semi-monthly payment option, half of your monthly payment amount will be taken from your account twice a month (e.g., the 1st and 15th of each month) and you will make 24 semi-monthly payments a year. This type of payment does not result in any significant interest savings.
Bi-weekly (non-accelerated)With the non-accelerated bi-weekly payment, you make a payment every second week (e.g., every second Thursday). Since there are 52 weeks in a year, you will make 26 payments a year (i.e., 52 weeks ÷ 2). To calculate the amount of your bi-weekly payments, multiply your monthly payment by 12 and divide it by 26 (e.g., $1,000 × 12 ÷ 26 = $461.54). This type of payment does not result in any significant interest savings.
Weekly (non-accelerated)With the non-accelerated weekly payment, you make a payment every week (e.g., every Thursday). Since there are 52 weeks in a year, you will make 52 payments in a year. To calculate the amount of your weekly payments, multiply your monthly payment by 12 and divide it by 52 (e.g., $1,000 × 12 ÷ 52 = $230.77). This type of payment does not result in any significant interest savings.
Accelerated bi-weekly The accelerated bi-weekly payment allows you to pay half of your monthly payment every two weeks (e.g., every second Thursday). Since there are 52 weeks in a year, you will make 26 payments a year (i.e., 52 weeks ÷ 2). By doing this, you make the equivalent of one extra monthly payment a year, which means you pay off your mortgage faster and save interest charges.
Accelerated weeklyIf you choose the accelerated weekly payment, one-quarter of your monthly payment amount will be debited from your account every week (e.g., every Thursday). Since there are 52 weeks in a year, you will make 52 payments a year. As with the accelerated bi-weekly option, you make the equivalent of one extra monthly payment a year, which means you pay off your mortgage faster and save interest charges.
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