In the previous articles, we saw that weekly mortgage repayment could save you more money than if you pay every month. Why? The explanation is simple and doesn’t change anything in the amount you have to pay.
Given that there is less time between each payment (every week instead of every month), a portion of the principal is repaid a few days all year long. During a term of 15, 20, 25 years or more, this strategy reduces the interest amount you have to pay to your bank. You repay your home sooner! As for compound interest, your savings are minimal for each weekly payment but dramatically increase with time!
To summarize, higher the frequeny of payment is and higher your savings on your mortgage loan will be. It is only a question of budget management: with the same money every month, you can pay every week, and that will change what you have to pay for your entire home!
EHere are examples of the benefits of weekly repayment:
In order to clearly understand what the difference in the payment frequency represents in your savings, let see few examples.
On a mortgage loan of $200,000 amortized over a 25 years term with interest rate of 5.4%, the accelerated weekly payment strategy make you pay $23 more on your principal every week. This represents savings of more than $29,000 just because you pay every week!
This simple change in the frequency you pay could make you repay your entire mortgage in a little more than 21 years instead of 25 years, for the same amount and same interest rate.
In other words, if you buys a $200,000 house with a rate of 5.4%, if you repay it only once a month, you will pay $362,749 for your house after 25 years ($162 749 in interest fees to your bank)!
But if you use accelerated weekly payments, you will pay $334 576 for your house ($134,576 in interest fees to your banks). Even better, you will have repaid your entire mortgage in approximately 21 years instead of 25!
Thus, regardless of your financial situation, if you are able to pay your current home mortgage, you get benefits to repay it every week!
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