You have just completed the mortgage approval process, and the inevitable question from your mortgage broker or bank adviser crops up: do you want to make weekly or monthly payments? If you answer weekly payments (my suggestion!), be aware that your choice doesn’t end there.
First of all, there is a big difference between an accelerated weekly payment and a regular weekly payment. The accelerated weekly payment equals the monthly payment divided by 4 whereas the regular weekly payment is calculated on the monthly payment multiplied by 12, divided by 52.
The accelerated weekly payment amounts to $250 a week and the regular weekly payment would be $230.77 a week.
This means you would be paying $19.23 more each week with the accelerated payment, which equals an additional monthly payment per year (%19.23 X 52 = $1000).
If you choose the regular weekly payment (very rarely offered), you will hardly save any amount compared to a monthly payment (approximately $300 over 25 years). On the other hand, if you choose the accelerated payment, you will save more than $13,000 on a $200,000 25-year mortgage with an interest rate of 3.5%.
So, the question you now have to ask yourself is whether you want to make the effort to pat $20 more a week to save more than $13,000 after 25 years.
Worth thinking about, isn’t it?
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