How does the payment schedule work on a mortgage?

It’s pretty flexible. You can make payments once a month or as frequently as once a week. Of course, the more frequent your payments, the more you save on interest.

Schedule more payments to save on interest

Make frequent payments, like weekly or bi-weekly installments, instead of monthly payments. You’ll be able to reduce your principal quickly, saving you tens of thousands of dollars in interest over the life of your mortgage.

Take advantage of prepayment options

Use prepayment options to pay down your mortgage faster -- with most mortgage terms, you can pay an extra 15% of the principal amount per year. The prepayment percentage is usually on the (larger) original principal amount rather than on the current amount you owe, which means you can whittle down your mortgage even more rapidly.

Prepayments are a great way to save on interest over time and a smart use of that year-end bonus or tax refund. So when you shop for mortgages, consider looking for one with competitive payment scheduling and prepayment options.

A look at different payment schedules

The chart below breaks down the interest savings you would receive using different payment schedules on a mortgage of $300,000 at 5% interest with a 25 year amortization:

Monthly (one payment per month)

Payment
$1,744.82
Number of payments per year
12
Total interest you pay
$223,443.02
Interest saved
$0.00

Semi-monthly (half your monthly payment, twice each month)

Payment
$872.41
Number of payments per year
24
Total interest you pay
$222,381.43
Interest saved
$1,061.59

Bi-weekly (you make a payment every two weeks)

Payment
$805.30
Number of payments per year
26
Total interest you pay
$220,571.04
Interest saved
$2,871.98

Rapid bi-weekly (half your monthly payment, every two weeks)

Payment
$872.41
Number of payments per year
26
Total interest you pay
$185,882.99
Interest saved
$37,560.03

Weekly (you make a payment every week)

Payment
$402.65
Number of payments per year
52
Total interest you pay
$220,088.08
Interest saved
$3,354.94

Rapid weekly

Payment
$436.21
Number of payments per year
52
Total interest you pay
$185,471.03
Interest saved
$37,971.99

Based on a mortgage of 300,000 at 5% (APR) interest on a fixed 5-year term, with a 25-year amortization.

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