Quote:
Originally Posted by tvp2003
I was looking at this exact issue before -- if you look at the link that red sky provided, there is only $179.52 difference (over 25 years!) between making monthly payments and bi-weekly payments. Not a lot of interest savings.
Accelerated bi-weekly payments, however, are a different animal because you are actually making an additional payment over and above your regular payments...
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FYI, that link sucks... (although it's true that the savings for non-accelerated aren't much, the explanaiton is all messed up)
It confuses semi-monthly with bi-weekly vs. bi-weekly accelerated.
You can potentially have:
Monthly
Semi-Monthly (payment = monthly/2 paid 24 times per year)
Bi-Weekly (payment = monthlyX12/26 paid 26 times per year)
Weekly (payment = monthlyX12/52 paid 52 times per year)
Semi-Monthly accelerated (payment = (monthlyX13)/24 paid 24 times per year)
Bi-Weekly accelerated (payment = monthly/2 paid 26 times per year)
Weekly accelerated (payment = monthly/4 paid 52 times per year)
Not all of these options are offered by all all lenders, and some are offered by only one or two, but every single one of them has a different impact on the amortization. The above list is in order from least impact on amortization to most impact. It is simply not correct to equate semi-monthly to bi-weekly, and bi-weekly will save a bit more than what is stated in the link.
Here's a better link, although it doesn't include semi-monthly accelerated. I only know of one lender that offers that though (I believe it's First National Financial), so it's not a big omission.
http://www.fcac-acfc.gc.ca/eng/publi...ptions-eng.asp