This calculator let's see how paying off a
mortgage by making bi-weekly mortgage payemts will save you money
by lowering your interest expense.
When you start a bi-weekly program. you end
up actually making one extra mortgage payment a year. So instead
of making 12 payments a year as you do on a monthly schedule you
divide the number of weeks in a year, 52 by 2 which give you 26 and
since you are paying half your mortgage payment each two week period
divide 26 by 2 and you get 13 full payments actually made each year.
This is very similar to just making one extra
mortgage payment a year. Note that due to having a smaller balance
during the course of the year if you make your extra payment at the
beginning of the year instead of the end of the year you will save
more. Spreading it out evenly as in a bi-weekly program pretty much
splits the difference between the two.
Note also the difference between a bi-weekly
and a bi-monthly program. If you just split your regular monthly
mortgage payment into halves and pay twice a month on your mortgage
you get almost no savings whatsoever because you are still just making
12 payments a year. The key is that with the bi-weekly payment you
are making an extra payment each year. The extra payment is where
the accelerated principle payment goes into affect and speeds up
paying off your mortgage.
The bi-mortgage payment calculator below will
work with other types of loans as well--any time you have a simple
interest loan.
