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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