Hey everyone, I’m sure this has been discussed before, but after my discovery today, I wanted to share it for any homeowners out there.
I called to setup autopay on a relatively new mortgage and was given the option for automatic weekly payments. With a 30-year mortgage of around $150,000 at 5%, by paying weekly instead of monthly (1/4 the monthly payment every week) I will pay off my mortgage six years early and save about $29,000 in interest over the life of the mortgage, without changing any of the terms.
If you aren’t already taking advantage of automatic weekly (or bi-weekly) payments, call your mortgage provider ASAP to find out what options you have and how it would impact your maturity date and total interest paid.
This works because you're making 13 months worth of payments in a 12 month period.
Don't forget to calculate the opportunity cost of the extra money you spent, what it could have earned for you had it not been spent toward the mortgage.
Paying more than you have to has real costs, as well as interest savings.
You are paying an additional 8.33% of your normal monthly payment each month, on average. Of course, a person could just throw in an extra payment every once in a while as well, they don't necessarily need to set up a weekly payment.