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Accelerated Payment Formula:
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Accelerated mortgage payment is a strategy where you make bi-weekly payments instead of monthly payments, effectively making one extra monthly payment per year. This approach helps pay down your mortgage principal faster and reduces the total interest paid over the life of the loan.
The calculator uses the accelerated payment formula:
Where:
Explanation: By dividing your monthly payment by 2 and paying every two weeks, you make 26 half-payments per year, which equals 13 full monthly payments instead of 12.
Details: Accelerated payments can significantly reduce your mortgage term and total interest costs. For a typical 30-year mortgage, this strategy can shorten the payoff period by 4-6 years and save thousands in interest.
Tips: Enter your current standard monthly mortgage payment amount. The calculator will show you the equivalent accelerated bi-weekly payment amount that will help you pay off your mortgage faster.
Q1: How much faster will I pay off my mortgage?
A: Typically, accelerated payments can reduce a 30-year mortgage to about 24-26 years, depending on your interest rate and payment amount.
Q2: Are there any fees for switching to accelerated payments?
A: Some lenders may charge a setup fee, but many offer this option for free. Check with your mortgage provider.
Q3: Can I switch back to monthly payments if needed?
A: Most lenders allow you to switch between payment schedules, though there may be restrictions or fees involved.
Q4: Is this different from making extra payments?
A: Yes, accelerated payments are structured differently and are automatically deducted, while extra payments are voluntary additional payments.
Q5: Will this affect my budget significantly?
A: The accelerated payment is slightly higher than half your monthly payment, so the impact on your bi-weekly budget is minimal while providing substantial long-term benefits.