Home » Simplify your calculations with ease. » Financial Calculators » Biweekly Mortgage Calculator with Extra Payments

Biweekly Mortgage Calculator with Extra Payments

Show Your Love:

The Biweekly Mortgage Calculator with Extra Payments is an innovative tool designed to help homeowners explore the potential savings and accelerated payoff schedule from making extra payments on a biweekly basis, rather than the standard monthly payment. This calculator provides users with detailed insights on how much quicker they can pay off their mortgage and how much they can save in interest over the life of the loan by adjusting the frequency and amount of their payments.

Formula

Biweekly Interest Rate Calculation

The biweekly interest rate is calculated by dividing the annual interest rate by 2600, reflecting the 26 biweekly periods in a year:

i = r / (26 * 100)

  • i: Biweekly interest rate
  • r: Annual interest rate in percent

Total Number of Biweekly Payments

The total number of biweekly payments over the mortgage term is:

See also  Absorption Variance Calculator

n = 26 * T

  • n: Total number of biweekly payments
  • T: Mortgage term in years

Regular Biweekly Payment

The regular biweekly payment is derive using the formula for an ordinary annuity:

M = P * (i * (1 + i)^n) / ((1 + i)^n - 1)

  • M: Regular biweekly payment
  • P: Initial principal or loan amount
  • i: Biweekly interest rate
  • n: Total number of biweekly payments

Biweekly Payment with Extra Payments

When extra payments are add, the total biweekly payment becomes:

M_total = M + E

  • M_total: Total biweekly payment including extra payments
  • E: Extra payment made each biweekly period

Adjusted Number of Payments with Extra Payments

The new total number of payments with extra payments is recalculate using a logarithmic function:

n_new = log((E + 1) / (E + 1 - P * i)) / log(1 + i)

  • n_new: Recalculated number of biweekly payments

Total Payments and Interest

Total payments and the interest paid are calculate for scenarios with and without extra payments:

  • Total Payments = M * n
  • Total Payments_new = M_total * n_new
  • Total Interest = Total Payments_new - P
See also  Treynor Ratio Calculator Online

Savings and Payoff Date

Savings from making extra payments and the estimate payoff date are calculated as:

  • Savings = (Total Payments) - (Total Payments_new)
  • Payoff Years = n_new / 26

Table for General Terms and Calculations

This table simplifies commonly searched terms related to mortgage payments:

TermDefinition
Biweekly PaymentPayment made every two weeks instead of monthly.
Extra PaymentAdditional amount paid to reduce the principal faster.
Total PaymentsTotal amount paid over the life of the mortgage.
Total InterestTotal interest paid over the life of the mortgage.
Payoff DateEstimated date the mortgage will be fully paid off.

Example

Let's consider a homeowner who has a mortgage with the following details:

  • Principal Loan Amount: $300,000
  • Annual Interest Rate: 4%
  • Loan Term: 30 years

Calculating the Biweekly Interest Rate

First, we calculate the biweekly interest rate by dividing the annual interest rate by 2600 (26 biweekly periods multiplied by 100 to adjust for percentage):

  • Biweekly Interest Rate = 4 / 2600 = 0.001538 per biweekly period
See also  Ascend Mortgage Calculator Online

Total Number of Biweekly Payments

Next, determine how many biweekly payments the homeowner will make over the life of the loan:

  • Total Biweekly Payments = 26 * 30 = 780 payments

Regular Biweekly Payment

Using the formula for calculating the regular biweekly payment:

  • Regular Biweekly Payment = 300,000 * (0.001538 * (1 + 0.001538)^780) / ((1 + 0.001538)^780 - 1)
  • Regular Biweekly Payment ≈ $770

Biweekly Payment with Extra Payments

If the homeowner decides to make an extra payment of $100 biweekly:

  • Total Biweekly Payment with Extra = $770 + $100 = $870

This example illustrates how the Biweekly Mortgage Calculator can be used to determine regular and extra payment amounts, helping homeowners understand their payment options and potentially shorten the term of their mortgage while saving on interest costs.

Most Common FAQs

How much can I save by making extra payments on a biweekly basis?

Savings can be significant, depending on the extra amount paid and the original loan terms.

Is it always better to make extra payments?

While making extra payments reduces interest and loan term, it's essential to consider financial stability and other investment opportunities.

How does the calculator handle varying interest rates?

The calculator assumes a fixed interest rate for simplicity, though variable rates would require different calculations.

Leave a Comment