Like a number of borrowers, mortgage payments are set up to be withdrawn from their account over selected pay periods. Some had heard and read that making payments more frequently would reduce the time necessary to pay off the mortgage significantly.
Instead of keeping the money in their account and paying a monthly payment at the end of the month, they believed that they would save on interest by paying more regular payment amounts ahead of time. For example if your monthly mortgage payment is $1200 and you select weekly repayments, the bank divides the monthly payment by four which means your weekly payment is $300.
The outcome here is that there are more than four weeks per month. So by paying one quarter of the monthly payment each week, you are in effect paying more money into your mortgage.
Over the course of one year, $1200 per month total $14,400. $300 per week totals $15,600 over the year which is $1300 per month. This is a $100 more than the original monthly payment.
This is why the “weekly” payment method pays down the mortgage faster.
What does all this mean?
Don’t worry about the frequency of your mortgage payment, just set it up so it fits your budget and salary period.
Increasing your total payments along with occasional extra payments will result in a mortgage that is paid down quicker. Whether you choose daily, weekly, fortnightly, or once a month, you should consider the total amount you pay each month and try to keep that as high as possible.
Simply put – the more you overpay the loan, the sooner you pay it off.
