When purchasers set up their mortgage, they often don’t realise that there is a world of payment options outside of the standard "monthly realm". Choosing the right payment frequency will not only pay off your mortgage quicker, but can save you thousands in interest.
For example, if you have a mortgage of $100,000 at today’s 5 year fixed rate of 3.89% with a 25 year amortization period, you will make monthly payments of approximately $520.00. If you instead choose the bi-weekly option with payments of approximately $239.00 you will see that the monthly dollar amount only changes slightly, but with the bi-weekly option you will be saving almost $10,000 in interest and will be paying your mortgage off much faster!
Although there is little difference between the actual payments, you have to be sure to select the option that best fits your personal needs and life style. Sure, making weekly payments will save more on interest than bi-weekly or monthly, but the stress of having a payment every week is not for everyone. Also, if you are self employed or work on commission and your income varies from month to month, you may want to stick with the monthly payment option and instead take advantage of your pre-payment privileges.
There are many ways to shorten your amortization period, save on interest, and pay off your mortgage faster so for more information please don’t hesitate to call.
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The Mortgage Centre