Equivalent Biweekly
Assume you have a mortgage of $111,768.97 at 5% amortized for 30 years. The traditional monthly payments would be $600. The MORTGAGE2 PRO Calculator or any other financial calculator would calculate the “regular” biweekly payment to be $276.18 for the next 30 years and save you $578.19 in interest over the 30 years. The $276.92 biweekly payment (same yearly cash flow as the monthly payment) would save you $1,329.92 in interest over the next 29.82 years. The $300 biweekly payment, called the accelerated biweekly in Canada (the yearly cash flow of 13 monthly payments) would save you $19,943.40 over the next 25.14 years. The interest cost for the $300 biweekly mortgage is $84,287.63
Biweekly mortgages are rare in the USA. One can easily use the MORTGAGE2 PRO CALCULATOR to pick a monthly payment by trial and error and recalculate the amortization period until the Calculator interest is close to $84,287.63
As a first guess try a monthly payment of 300×26/12=$650 Increase it by increments of 50 cents and recalculate the amortization period by clicking on the “Amortization Period” prompt message in front of the Amortization Period Calculator box.
The calculator interest of $84,286.79 is close enough to say you have approximately an “equivalent mortgage” over the next 25 years.
As a side bar it is interesting to note that at low interest rates of 5% or 6% the weekly and the biweekly payment plans are almost the same as far as savings are concerned. Some people may not get too excited about savings of approximately $20,000. When the rates are in the 12% range the weekly and biweekly really start to outperform the traditional monthly mortgage, as can be readily seen by the example below. The same mortgage at 12% doing the accelerated biweekly payment of 574.83 would save $133,908.61 in interest over 18.73 years which is quite significant.
