What is the difference between an accelerated weekly payment and a non-accelerated payment?
Simple! If your mortgage costs you $1,000 a month, and you want to pay it weekly, your financial institution will ask if you want to make the accelerated payments or not.
Here is how the accelerated payment works:
$1000/month divided by 4 = $250 a week for 52 weeks. This equals a total annual payment of $13,000 instead of $12,000 ($1000 x 12 months), which represents one extra monthly payment per year. This extra payment is immediately applied to the loan capital at no interest cost.
The non-accelerated (normal) payment method :
$1000 x 12 months divided by 52 weeks = $230.77 a week.
In sum, for a difference of less than $20 a week, you could decrease the time frame of your mortgage by almost 3 years if you choose the accelerated method instead of the standard option. This will save you thousands of dollars in interest. Accelerated is the way to go!
The final question then is: how do you tighten your belt by $20 a week in order to save 3 years on your mortgage? Do you have any tips or tricks on how to save $20 a week?
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