Payment schedules

In terms of payment schedules, there are many options available in the marketplace, including weekly (52 payments a year), biweekly (26 payments a year), semi-monthly (24 payments a year), monthly (12 payments a year) and other variations. Payments made on the mortgage are usually a blend of principal and interest. These have traditionally been amortized assuming a monthly payment basis. The more frequently you make payments, the lower the amount of interest that you should be paying and the sooner you should be able to pay off the mortgage. Some lenders give you the option of increasing the amount of your monthly payments-once a year, for example- by 10% to 20% more. Other lenders have an option permitting you to double up on your payments. There are many different options available, so thoroughly do your research.

Be particularly careful if you plan to or are making payments more frequently than on a monthly basis. Have the lender supply you (for free) with a computer spreadsheet showing the financial benefit of making payments more frequently. Depending on how the lender calculates the payment schedule, your frequent payments (e.g., weekly) may not save you any money at all. You want to make sure your frequent payments will result in an accelerated pay down of the mortgage (e.g., pay off a 25-year amortized mortgage 4-1/2 years sooner).

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