A blog cannot deal with all aspects of a subject and is not intended to replace professional advice. It's purpose is to highlight information and identify areas of possible interest. Anyone wishing to discuss this blog or to make any comments or suggestions about this blog is invited to do so by either posting comments or emailing me directly.
January 27, 2012
How Can You Save $24,000 on Your Home Purchase?
Let's assume you're buying a home and will have a $300,000 mortgage that is amortized over 25 years. With an interest rate of say, 3.99%, your monthly payments would be $1,576. Over the course of that 25 years you will end up paying a total of $472,930 for your home (assuming the interest rate doesn't change on the term renewals).
Many people earn their paycheque every two weeks. Do you? What about this: instead of paying $1,576 once a month, would you be in a position to pay 1/2 of the $1,576 (or $788) every two weeks? Sounds almost the same doesn't it?
In reality, by paying 1/2 your monthly mortgage payment every two weeks instead of the full amount once a month you end up paying two extra payments (or 1 extra month) every single year. This is just like your paycheques - twice a year you get an "extra" paycheque.
If you're paid every two weeks and you pay your mortgage every two weeks, it actually helps with your cash-flow and money planning.
Not only that, but those "extra" payments add up! And add up big-time!
With making payments of $788 every two weeks, your mortgage is paid off in just under 21 years, 11 months – saving you 3 years of mortgage payments. And the total amount you will have paid will only be $448,560 in mortgage payments of principal and interest for your home. That's a total savings of $24,370.
Remember, the higher the interest rate and the larger the mortgage, it equates to even more money saved using this payment plan strategy!
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