Based on a $100,000 mortgage at 6% interest for a 5-year term amortized over 25 years.
Your monthly payments would be $639.81.
You would pay $28,225.07 in interest over the first 5 years.
You would pay $10,163.50 in principle over the same 5 years.
Implementing a Bi-Weekly Payment:
(Using the same $100,000 mortgage at 6% interest for a 5 year term amortized over 25 years:)
You now would be paying bi-weekly payments of $319.91.
You end up making two extra payments during each calendar year: one in November and one in July which, when totalled, is only one extra payment per year.
You would pay $27,646.99 in interest over the first 5 years.
You would pay $13,941.31 in principle over the same 5 years.
What You Will Save:
First, you will save $578.08 in interest payments over the first 5 years
Second, you will have paid an extra $3,777.78 in principle over the 5 years
Third, your payment stays close to the same except you now make two extra payments instead of one each month and they are made when you get your pay cheque.
In other words, you will pay off your mortgage faster just by paying your mortgage on a bi-weekly basis. The best part is that you won't likely even notice it after a few months. Just like anything we do that's new to us, it takes time to turn it into a routine. You need to adjust a little to plan for payments, but will like the numbers on your updated mortgage statement.
Courtesy of Daryl Marsden, VERICO Canada Mortgage Direct