On almost every new mortgage I complete I get asked this question, my friend told me that if I do biweekly payments or weekly payments, I’ll save thousands of dollars in interest vs monthly payments. Short answer, no. Payment frequency does save a little bit of money, but it is so small that you’re better off choosing a frequency that best suits your lifestyle and pay. If you’re paid biweekly it can be a lot easier if your mortgage payments just come off your pay to help you budget. Whereas many people who are self employed prefer monthly payments as income can be erratic and unpredictable at times making it easier to plan for once a month. Let’s look at the different scenarios!

Changing the Payment Frequency! How much do I save?

What I want to illustrate here is that changing frequency won’t save you much money. For the 65 dollars over 5 years you’re better off choosing what best suits your lifestyle!

Changing the Payment frequency and Accelerating Payments

This is where we get into the savings! This is when you choose an accelerated weekly or bi-weekly option. Check out the graph below

There are two things I want to point out here. First, you actually paid 6,720.80 more by accelerating your payments then if you made the monthly payments. Reason being is by accelerating your payments the only difference is you are paying more money each year and that money goes directly towards your mortgage balance and not to interest. You’re paying it down faster! Additionally, you’ll save $500 in interest over the 5 years. Here’s the real kicker on the difference from accelerated payments to regular payments.

Because of the switch, over the lifetime of your mortgage you’re going to save almost 12k on interest! Plus, you’re mortgage free 2 years 7 months earlier. The thing about this, is you can create the exact same result by increasing your monthly mortgage payments in the same way an accelerated weekly payment is increased.

Moral of the Story

You won’t save money by just switching your payment from monthly to bi-weekly or weekly! You will, however, save a lot of money by increasing your regular payments. This increase will reduce your lifetime interest paid and pay your mortgage off faster! It’s like making a lump sum payment but instead of trying to budget it for once a year you’re doing it with every payment.

If you want to learn how you can pay off your mortgage faster give me a shout anytime and we can go over your options!