Understanding the difference in your monthly payments is crucial. By not over leveraging yourself when you make your purchase or obtain a refinance allows you to access smaller amortization periods, bi-weekly payments and percentage increased pre-payments to save HUGE on unnecessary interest expense.
The following is a breakdown that shows you the significant difference in payments. Please use this knowledge to properly structure your mortgage payment with us.
We are using the average Greater Vancouver mortgage of $330,000 with an interest rate of 4% (irrelevant example):
| Payment Terms | Payment Amount | Interest Paid over 25 Years | Balance after 5 Years |
|---|---|---|---|
| Monthly | $737.87 | $90,759.36 | $287,277.69 |
| Bi-Weekly | $867.94 | $63,756.66 | $277,583.67 |
| Payment Terms | Payment Amount | Interest Paid over 30 Years | Balance after 5 Years |
|---|---|---|---|
| Monthly | $569.21 | $234,916.99 | $298,317.91 |
| Bi-Weekly | $784.61 | $97,902.57 | $289,554.52 |
(Please note that the bi-weekly payment is accelerated and paid every 14 days.) As you can see, the bi-weekly mortgage payment is hands down the best way to go. You save $10,000 by using a bi-weekly payment in this example. Now lets take a look to see what would happen if you simply increased your bi-weekly payment by only 10%:
| Payment Terms | Payment Amount | Interest Paid over 25 Years | Balance after 5 Years |
|---|---|---|---|
| Bi-Weekly | $954.94 | $39,072.07 | $265,085.69 |
| Payment Terms | Payment Amount | Interest Paid over 27 Years | Balance After 5 Years |
|---|---|---|---|
| Bi-Weekly | $862.61 | $65,569.63 | $278,349.39 |
A simple 10% increase on a bi-weekly payment with 25 year amortization just saved almost $25,000! I don’t mean to bore you with numbers but just wanted to show you the power of not over-leveraging yourself.
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Remember to Own Your Life and have a nice day!
Best Regards,
Jessi Johnson