Weekly vs. Monthly
Yes it’s true by having weekly payments instead of monthly payments you can reduce your amortization by almost 4 years based on an amortization period of 25 years
Please refer to example below:
| Mortgage: | 200 000$ |
| Interest rate: | 3% |
| Payment Frequency | Payment Amount | Years of Amortization | Interest Paid | Interest vs. Monthly Pmt |
| Monthly | $946.49 | 25 | $83947.5 | $0.00 |
| Weekly | $218.62 | 25 | $83545.79 | $401.65 |
| Bi-Weekly | $436.84 | 25 | $83666.46 | $280.98 |
| Accelerated Weekly | $236.62 | 22.26 | $72088.28 | $11859.16 |
| Accelerated Bi-Weekly | $473.25 | 22.26 | $72215.86 | $11731.58 |
It is evident that by having weekly payments instead of monthly payments you save close to four years of payments. It is like making 13 monthly payments per year.
If we compare equal yearly payments we realize that the savings from weekly vs. monthly is only 2 months or $1256.00 after 21 years. Conclusion it is not the frequency of payments paid but the amount paid per year that makes the difference.
Finally your thinking why is there so little difference on the final amortization period comparing Monthly vs. monthly accelerated? The interest payments are calculated on a semi-annual basis that’s 2 times per year.