I am glad you decided to Ask Phil. Thank you! The truth is the real value is in how MUCH, not how MANY payments you make in a year. Huh?
Here is the real value. Most mortgage providers tell you to do weekly or bi-weekly mortgage payments and save tons of money.
So, you take your $1500 a month payment you have budgetted for, and pay $375 each week instead.
What are you doing? You have increased your monthly mortgage payment budget to $1625, not $1500. ($375 x 52 weeks / 12 months= $1625)
The mortgage provider will tell you those weekly payments will take a $340,290 mortgage balance at a 4% rate from 35 years amortisation to 29.69 years, Almost 5 and 1/3 years is saved with the simple act of using a weekly payment instead of monthly?
Only if you fall into the trap of taking that $1500 payment and diviiding it into 4 payments.
What if you said, "I can budget $1625 per month for my mortgage payment."
How long will it take to amortise the same $340,290 mortgage at 4%? 29.76 years- Almost 5 and 1/4 years is saved.
What is the truth? Paying 1388 weekly payments will save you a month of payments in the almost 30 year life of the mortgage compared to the equivelant 358 monthly payments of $1625.
Now, I ask you: did you really budget to pay an additional mortgage payment a year? That's what the payment / 2 or payment / 4 does to you.
Could that additional annual payment be used more wisely?
- Paying down credit cards or other debt with a rate higher than the mortgage rate?
- Contributing to a Registered plan like Retirement or Education plans?
- Establishing a cash reserve in a tax free saving account?
- Investing for potentially greater returns in non-registered mutual or segregated funds?
- Laying on additional income protection with disability or other insurance?
- Saving your sanity by reducing the book-keeping of 1388 payments compared to 358?
For information that is truly specific to your circumstance- Ask Phil for an analysis of your mortgage plan.
IF you have your mortgage offer or statement available, I can be very precise to your circumstance.