This calculator shows you possible savings by using an accelerated biweekly mortgage payment. Biweekly payments accelerate your mortgage payoff by paying 1/2 of your normal monthly payment every two weeks. By the end of each year, you will have paid the equivalent of 13 monthly payments instead of 12. This simple technique can shave years off your mortgage and save you thousands of dollars in interest. Click on the "View Report" button to see your savings!
Community State Bank
802 E Albion St
Avilla, IN
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In most cases, you can save a lot of time and money by simply making 1/2 of your normal monthly loan payment every two weeks. That's because doing so results in making one extra loan payment per year (13 instead of 12) without hardly noticing the difference in your cash flow. The following mini-calc will show you how much your bi-weekly payment would be: As you will see, when using the
full calculator, this small change in your loan repayment method can make a huge difference in the amount of interest you will end up paying.Learn
How switching to biweekly payments works, and what to watch out for.
When "13" is Not Unlucky
But before you switch to making bi-weekly payments, be sure to check with your lender to make sure they allow you pay off your loan ahead of schedule. Some of the sneaky devils just hold your extra payments in escrow and apply them based on the original monthly amortization schedule.
How to Convert Bi-weekly to Monthly
In case you need to convert bi-weekly payments to monthly before using the calculator, here is how I make the conversion, along with a mini calculator that will do the conversion for you:
| Average number of days in a year ((365 x 3) + 366) ÷ 4): | 365.25 |
| Number of weeks in a year (365.25 ÷ 7): | 52.1785714 |
| Number of biweeks in a year (52.1785714 ÷ 2): | 26.089 |
| Multiply biweekly payment amount by biweeks/year (26.089 x $500): | $13,044.64 |
| Monthly equivalent ($13,044.64 ÷ 12): | $1,087.05 |
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If you have the available cash flow, you can make extra payments which are used to reduce the loan balance. When you decrease the amount owed, you lower the amount of interest due. Doing this is called prepaying principal.
Even making one extra payment will save you interest. This calculator supports both lump sum or one-time extra payments as well as a series of additional payments.
To see how much you'll save, you may apply the extra payment to either the monthly loan or the biweekly loan, or both. The idea here is, you may want to compare a debt paid biweekly without additional payments to a debt paid monthly, where you do plan to make extra payments.
Or you may want to see how much the biweekly loan will save over the conventional loan when you add extra payments to get an additional saving boost.
Note: In keeping with the theme of this calculator, the extra payment for the biweekly loan will be 1/2 the amount you enter. This is an intentional design feature, not a bug!
A biweekly loan will save you money.
A biweekly loan and making extra payments will save you even more money.
But is doing either the right, long term, financial strategy?
Forgone Opportunity Costs - They Could Cost You!
At the top of this post, when explaining how a biweekly payment loan works and how it saves interest charges, I showed you some simple arithmetic. In the example, if you, the borrower, elects to pay every other week, you'll pay $2,000 more per year than if you make 12 monthly payments.
You should ask yourself, what else could you be doing with the $2,000?
Could you be investing it?
If you make biweekly payments, you lose the opportunity to invest them. Not being able to save and invest is a forgone opportunity. It does not come back.
The question then is, if you invested the $2,000, how much would it earn over the term of the biweekly loan? Would you gain more than you expect to save interest charges?
Several calculators on this site will answer these questions for you. This Savings Calculator is a good place to start.
What you want to know is what will be the future value of $2,000 invested every year for the next 22 years or so (typically the term of the biweekly loan at today's interest rates). If the future value is more than that amount you save in interest, then perhaps you should not take out a biweekly mortgage?
Remember though, there are usually risks to investing, while the interest saved with a biweekly mortgage or loan is a mathematical certainty.
Charts
If you are like me, you'll get tired of staring at columns of numbers. That's where charts come into play. Take a look at the recently updated charts to get a quick summary of all the details you'll find in the amortization schedules.
This calculator includes six of them.
If you are a blogger, feel free to export () any of the charts you create and to post them on your site to help prove your point!
What do you think?