We're switching our mortgage from bi-weekly payments to weekly. Although this doesn't result in as much interest savings as shortening the amortization period would, it still helps by reducing more quickly the balance of the loan that the interest is calculated on.
I've heard that there are even daily mortgages available - interesting!! I'm skeptical that our bank would offer this, but I'm going to ask. I'll let you know what I find out...
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2 comments:
Do you have to have your bank set this up for you? Could you just start sending the money weekly? I make one extra payment a year by multiplying the monthly payment by 13, then dividing by 12. That way every month I pay a little extra, but over the year it adds up to an extra payment. Do you think that is the same or should I pay twice a month, or weekly?
It depends on the bank - I would call yours and find out.
What you're doing now might be better if the extra that you are paying is going directly to the principal - "principal only" payments can really reduce the overall amount of interest you pay.
With weekly payments, although they are not principal only, the theoretical benefit is they reduce the principal faster than monthly, thereby reducing overall interest.
What I would do if I were you is a) find out if the extra you are paying is going directly to the principal, and b) have them calculate the difference in interest saving between what you are doing now v.s. weekly payments.
Good luck! (And thanks for visiting my blog :-)
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