30 July 2010
The main thing about it is how the bi-weekly payment is calculated. A small example will explain it to you. Let’s suppose, for instance, that your monthly mortgage payment is $1,000.00. It means, your total yearly payment is $12,000.00 (1,000 X 12 months). By dividing the $1,000.00 by 2 you’ll get bi-weekly payment of $500.00. And that means your total yearly amount will be $13,000.00 (500 x 26 bi-weekly pay periods). In the end, you’ll reduce your 25 year mortgage amortization down to 21 years – it’s 4 mortgage-free years.
There’s another way to reduce your amortization – lump sum payments or increasing your minimum payments. No matter what you choose, it has to influence your mortgage amortization term.
And the last, but not the least, is “All-In-One” product. It helps you to combine your mortgage debt and up to 99 regular accounts into one product (you can also divide your mortgage into fixed, variable and multiple line of credits components). In this case every deposit (such as payroll) you make to the chequing account automatically reduces your mortgage outstanding balance, but every withdrawal increases it. The main idea is that by combining it all into one account you save money on interest expenses. But you still must be ready for your bank negative balance, so it’s better to consult your mortgage adviser and do not use your house as an ATM machine.