Weekly Mortgage Payments Vs. Monthly
If you simply enter the terms for a new home loan into the weekly mortgage payment calculator, you will note that you may only save a couple of hundred dollars by choosing to repay the home loan using weekly mortgage payments vs. monthly mortgage payments. This is because the annual total of your weekly mortgage payments will be close to the same as the annual total of your monthly payments.
To save a large chunk of time and interest, you need to increase the annual total of your payments. One way to do that -- while hardly noticing the increase -- is to simply make 1/2 of your monthly house payment every two weeks. This will result in making 26 bi-weekly payments per year, which is the equivalent of making 13 monthly payments per year instead of 12.
Now you would think that we could double the savings if we use the same process to switch from monthly payments to making weekly mortgage payments. However, if you divide your monthly payment by 4 and pay that result on a weekly basis, you will see that the annual total of your 52 weekly payments would be identical to making 26 bi-weekly payments.
Therefore, to significantly increase your bi-weekly mortgage interest savings when switching to a weekly repayment method, you would need to look at making the equivalent of 14 monthly payments per year instead of the 13 you would make using the bi-weekly payment method. In other words, your weekly mortgage payments would be calculated as follows:
The above formula is the one used by the weekly mortgage payment calculator on this page, which results in making the equivalent of 14 monthly payments per year.
Beware of Excessively Greedy Mortgage Companies
Since switching to weekly payments results in the prepayment of principal ahead of the original home loan terms, there are numerous, unscrupulous mortgage companies out there that take offense to you cutting into the massive year-end bonuses they have promised to their executives. While some of these companies will simply escrow your prepayment and apply payments as they were scheduled (giving you "the finger" for your early payoff attempt), the more dastardly among them will go so far as to charge you a penalty for prepaying the principal.
In any case, before you start making weekly mortgage payments, be sure to check with your home loan company to make sure your principal prepayments will be applied to the balance as you make them -- free of any prepayment penalties.