Have you ever hear that it is better to repay your mortgage every week or every two weeks? Is that true that this strategy could save you a lot of money in interest fees?
In order to understand this strategy, we have to define two different weekly payment options. The first one is the accelerated weekly payment and the second one is the minimum weekly payment.
The accelerated weekly payment is the most common method. You pay every week one fourth of your mortgage loan monthly payment. But there are not only four weeks per month but a little more. The result? You pay four weekly payments more over the year, which increases your payment of your house.
It is the reason why this strategy is called the accelerated payment.
The other strategy is the minimum weekly payment. With this strategy, you pay the minimum amount every week until the end of the amortization when your home mortgage is completely repaid.
Are those two methods make you save on your home mortgage?
Of course, what you save using these two methods of weekly repayment of your mortgage loan is not the same. The minimum weekly payment only increases the frequency of your payments (52 times a year instead of 12 every year). But the accelerated weekly payment increases the frequency of your payments and adds four additional payments!
Let see what happens on repayments with these two different strategies. In comparison to monthly payment, the strategy of minimum payment weekly will save you $1294 on a $200,000 home mortgage repaid over a term of 25 years (with interest of 5.4%).
You also get 43% more savings with a weekly payment compared with payment every two weeks regardless of interest rates. The higher you pay your interest rate on your mortgage, the higher the weekly payment strategy is effective!
Thus, if you ask you if it could be good to use a weekly payment method, the answer is yes!
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