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Home Owner Strategy

Here’s a strategy for home owners that when not aware, can cost them over $15,000 over 25 years on a home worth $200,000 at 3.7% interest.  The monthly payment would be $1020 but for easy math, let’s round it to $1000.  Did you know that if your mortgage payment $1,000 per month your paying $12,000 a year?  Of course, that’s the no brainer part.

Here comes the trick.  If you pay weekly or bi-weekly so let’s assume the $1,000 in 4 weeks in the month will give you $250 per week or $500 bi-weekly.  When you pay all that in the year, the assumption is that the total is the same $12,000 however that’s not true.  When we round up the weeks, it plays against us and for the banks.  As if the banks or financial institution will advertise this as it’s talking away so much money away from them.

In a month there are 4.3 weeks.  So if you make your payment weekly, you make 52 payments or bi-weekly it would be 26 payments.  So it’s like you’re paying 13 month instead of 12.  So 52 times $250 equals $13,000 or 26 times $500 equals $13,000.  Imagine putting an extra $1000 per year on your capital for just even 15 years.  That’s an extra 15k.  But the savings don’t stop there.  Because you put extra money on your capital every year, you’ll pay less and less in compound interest which will be HUGE!!!  All that for what is perceived to be the same.

After all, the only difference was a merely 0.3 difference between 4 and 4.3.  It’s crazy sometimes how little bits of knowledge like this can slip right through our fingers.  Let me ask you this; “why give an extra bonus to the banks when you can use your own money.”

http://www.canadamortgage.com/calculators/amortization.cgi?CFID=1420030&CFTOKEN=44537254

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