The oversite, a 360 day year vs a 365 day year, is not critical in his flawed analysis, because the minimum weekly payment quoted understates the savings by an amount of $510 ($1,096.69 – $586.53 ) if the borrower elected to remain with the 25 year schedule while making the minimum weekly payments. What is critically wrong is the author uses the minimum weekly payments in his analysis. He should have informed the readers about the differences in the three weekly payments that are usually offered by the Banks.

Before describing this critical flaw regarding an apparent misunderstanding of the weekly payment plans I will reiterate the only rule to remember to save interest on a mortgage. PAY BACK THE LOAN AS QUICKLY AS POSSIBLE! Prior to the introduction of weekly payment mortgages in Canada (1984) the only way to pay back a mortgage as quickly as possible was to increase the monthly payment, therefore automatically reducing the amortization period. For a given principal and annual interest rate, when the payment is increased the amortization period must decrease according to the laws of algebra. If you decrease the amortization period for a given principal and interest rate the payment must increase according to the laws of algebra. The result is exactly the same. The interest clock is started the moment you borrow money. The sooner you make a payment, the less interest you pay.

By paying weekly payments instead of monthly payments you save on interest because less time has elapsed. Obviously, the amount of the weekly payment is important. Pay the largest weekly payment your budget can afford. The larger the weekly payment , the more dramatic the decrease in the amortization period, according to amortization algebraic laws.

This is the way mortgage should have been handled!!!

You go to the Bank, ask for a loan of $240,000 they offer you 4.6% for 25 years and you initially ask for a monthly payment. They quote you $1341.71 per month and everything is OK. You divide the monthly payment by 4.3333 and arrive at the non accelerated weekly payment of $309.63. You then divide the monthly payment by 4 to arrive at the accelerated weekly of $335.43.

If you pay $1341.71 per month it will take 25 years to pay off the mortgage. If you pay $309.63 per week it will take 24.87 years to pay off the mortgage, BUT you will save $2,032.74 cents for doing nothing, which is why I call it free money! The non accelerated weekly and the monthly is the same amount of money paid back to the Bank at the end of the year. If you pay $335.43 per week it will take 21.59 years to pay off the mortgage and you will save $25,990.19.