Does anyone know how to calculate the savings from a bi-weekly mortgage payment?

Question

I've been trying to figure out if it's worth using a bi-weekly payment schedule for my mortgage. I don't know what equation to use in order to see if it's worth doing every month. Any help would be appreciated!

Answer 1

Here's a calculator you can try. I don't know how well it works but it should give you an idea.

Answer 2

Here's what I know about bi-weekly mortgage payments.

Don't do it.

First of all, they will charge you a few dollars for each and every withdrawal you make. This can easily cost you up to $100 per year in wasted money.

Second, many charge an upfront fee to set this up, some banks will actually charge you a higher interest rate!

Lastly, regardless of what it sounds like, these banks only actually apply your payment to your actual balance once the amount equals one extra payment. So, you don't actually get the real benefit of bi-weekly principal reduction. Almost never, at least.

And of course it restricts your flexibility. Are you paid bi-weekly or twice a month? Will you always, without fail, be able to have that money in your bank every 2nd Friday?

The best solution is to simply take your total monthly payment, divide it by 12, and add that amount to each monthly payment you make. You will get real principal reduction every month. You can stop it if you need to. And you pay zero extra fees for doing this. I've also heard reports that the handling of payments on these biweekly deals is sometimes quite poor, lots of errors, lots of headaches as you try to get things fixed.

Honestly, the ONLY benefit to the biweekly plans is that it forces you to make those extra payments, if you wouldn't have the fiscal discipline to do it on your own. And of course, it's very easy to look at your bank balance at the end of the month and say "Nah, I'll just do it next month instead", and say the same thing next month, and never actually make those extra payments.

There's hundreds of online amortization calculators available. Yahoo finance, bankrate, mortgage101.com, etc...

In general, adding 1 extra payment annually (which is all the bi-weekly plan really does), will reduce a 30 year loan to 21-22 years. It varies based on your interest rate, and whether your extra payments include the amount that would've gone to taxes and insurance.

By contrast, on a normal 30 year fixed-rate loan, it take the same 21-22 years to pay HALF your original balance. And only 8-9 years to pay the 2nd half of the balance. So it is a powerful impact you make if you do pay extra consistently. Can save you tens of thousands of dollars in interest over the course of the loan.

But just do it yourself and save yourself the time, money and headaches you'll get with a bi-weekly plan.

Answer 3

When I was considering this option, my mortgage company, Countrywide, sent me a print out. You are making 13 payments a year, which pays off the loan quicker and saves you in interest, too. See if your lender will send you a print out comparing regular monthly payments, and with the new payment schedule. Of course its worth it.

Answer 4

This is a great question...I too would like to know how to calculate a bi-weekly home mortgage payment. Anyone know?

Jord - UK Home Mortgages
http://www.ihomemortgages.co.uk

Answer 5

Great question First, make sure your financial instution will apply the payments the way YOU think they should Get out your mortgage contract and read it very carefully. There really are a lot of "we won'ts" in there. please feel free to contact me, for I do mortgages excatly like these for my business. Now, as far as the question if you have the right mortgage, absolutly, you can knock down the principal very fast IF it is applied as principal first, and not interest first. The banks want to charge you interest as long as they can.