Standard vs. Bi-Weekly This easy to use calculator compares a standard mortgage with a bi-weekly mortgage. An easy to read format shows you how much you will save in interest and time if you switch to a bi-weekly rather than a standard mortgage. Bi-weekly mortgages require payments to be made every two weeks rather than once a month, totaling twenty-six payments.
This accelerated payment option may require a bit more discipline in the beginning, until you get used to the schedule of paying the mortgage twice a month. However, this might even work out better for some homeowners- two smaller payments instead of one large payment. Additionally, since the payments are already pre-determined and established, you will have to make them, guaranteeing that a savings will be realized.
Plus, the savings realized by speeding up your payments is well worth the effort, even when you take into consideration the loss in tax savings. Obviously, if you are spending less on interest, you will deduct a smaller amount from your taxes. Your tax savings may decrease, but this is minor compared to the tremendous savings that you can realize with the savings in interest from a bi-weekly loan.
A bi-weekly loan essentially leads to one extra monthly payment each year. Think about it for a minute. Not only have you paid an extra month's principal in a year's time, but also, you will pay less interest in the following year since the principal balance is smaller. Obviously, the mortgage is going to be paid off more quickly with a bi-weekly mortgage over a standard fixed-rate mortgage.
Although bi-weekly loans do not affect the manner in which interest accrues each month, they do decrease the amount of interest spent over the term of the mortgage. This is where the savings begins with a bi-weekly mortgage. With a shorter mortgage payoff term, your finances will be available for other expenditures sooner rather than later.
Calculator Legend
- Amount: Enter the total amount of money borrowed. This should include any closing costs that will not be paid separately.
- Interest Rate: Enter the rate of interest attached to the loan as a percentage.
- Length: Enter the term of the loan- the number of years.
- Tax Rate: Enter the tax bracket that your income places you in for federal taxes.
DISCLAIMER: There is NO WARRANTY, expressed or implied, for the accuracy of this information or it's applicability to your financial situation. Please consult your own financial advisor.
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