| Description | Amount |
|---|---|
| Monthly Payment Amount | $0 |
| Interest with Monthly Payments | $0 |
| Bi-weekly Payment Equivalent | $0 |
| Accelerated Bi-weekly Payment | $0 |
| Interest with Accelerated Bi-weekly Payments | $0 |
| Bi-weekly Savings | $0 |
| Biweekly Payoff Time | 0 years, 0 months |
| Time Savings (compared to monthly) | 0 years, 0 months |
The Monthly vs. Biweekly Mortgage Calculator is an essential financial tool designed to help homeowners compare the effects of monthly and biweekly mortgage payments on the overall term of their loans and the total interest paid. This calculator provides a clear, numeric breakdown showing how switching to biweekly payments can potentially reduce the loan term and total interest, which can lead to significant long-term savings.
Formula
Monthly Payment Calculations
Monthly Interest Rate Calculation
- Formula:
monthlyRate = interestRate / 1200 - Explanation: This formula converts the annual interest rate into a monthly interest rate by dividing by 1200, accounting for both percentage conversion and the number of months.
Total Number of Monthly Payments
- Formula:
totalMonthlyPayments = loanTerm * 12 - Explanation: Determines the total number of monthly payments by multiplying the loan term in years by 12.
Monthly Payment Amount
- Formula:
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, totalMonthlyPayments)) / (Math.pow(1 + monthlyRate, totalMonthlyPayments) - 1) - Explanation: This uses the standard formula for an amortizing loan, taking into account the principal, the monthly interest rate, and the total number of payments.
Total Interest with Monthly Payments
- Formula:
totalInterestMonthly = (monthlyPayment * totalMonthlyPayments) - principal - Explanation: Calculates the total interest paid over the life of the loan by subtracting the principal from the total paid.
Biweekly Payment Calculations
Bi-weekly Interest Rate Calculation
- Formula:
biweeklyRate = interestRate / 2600 - Explanation: Converts the annual interest rate into a bi-weekly interest rate by dividing by 2600.
Bi-weekly Payment Equivalent to Monthly Payment
- Formula:
biweeklyPayment = monthlyPayment / 2 - Explanation: Determines the equivalent bi-weekly payment by dividing the monthly payment in half.
Accelerated Bi-weekly Payment
- Formula:
acceleratedPayment = biweeklyPayment + extraPayment - Explanation: Adds an optional extra payment to the regular bi-weekly amount to further reduce the balance.
Total Payments and Interest with Accelerated Bi-weekly Payments
- Formula to find the number of accelerated payments:
totalAcceleratedPayments = Math.ceil(Math.log(acceleratedPayment / (acceleratedPayment - principal * biweeklyRate)) / Math.log(1 + biweeklyRate)) - Explanation: Uses logarithmic functions to calculate how many payments will be made until the loan is paid off with the accelerated schedule.
- Formula for total interest paid:
totalInterestAccelerated = (acceleratedPayment * totalAcceleratedPayments) - principal - Explanation: Calculates the total interest paid with accelerated bi-weekly payments.
Bi-weekly Savings
- Formula:
biweeklySavings = totalInterestMonthly - totalInterestAccelerated - Explanation: Shows the savings from paying bi-weekly with extra payments compared to the standard monthly plan.
Table for General Terms and Calculations
This table provides definitions for key terms used in mortgage calculations, aiding understanding and application:
| Term | Definition |
|---|---|
| Principal | The initial amount of the loan. |
| Interest Rate | The percentage charged on the borrowed money. |
| Monthly/Biweekly Payment | The amount paid every month or two weeks. |
| Total Interest | The sum of all interest payments made over the life of the loan. |
| Loan Term | The duration over which the loan will be repaid. |
Example
Let’s explore a practical example using Alex’s mortgage details:
- Principal Loan Amount: $250,000
- Annual Interest Rate: 4.5%
- Loan Term: 30 years
Monthly Payment Calculation
First, we calculate the monthly interest rate and then the monthly payment:
- Monthly Interest Rate: 4.5 divided by 1200 equals 0.00375
- Total Monthly Payments: 30 years multiplied by 12 equals 360 payments
- Monthly Payment Calculation:
- Alex’s monthly payment is calculated by multiplying the principal by the monthly interest rate and a factor derived from the number of payments, then dividing by another factor derived from the interest rate:
- The monthly payment approximately equals $1266.71
Biweekly Payment Calculation (Equivalent and Accelerated)
Next, we calculate what the payment would be if made biweekly:
- Biweekly Payment: $1266.71 divided by 2 equals $633.36
If Alex decides to make an extra payment of $100 biweekly, the accelerated biweekly payment becomes:
Accelerated Biweekly Payment: $633.36 plus $100 equals $733.36
Most Common FAQs
Biweekly payments can significantly reduce the total interest paid and accelerate mortgage payoff.
Biweekly payments require more frequent budgeting and may not be suitable for those with variable income.
Savings vary based on loan specifics, but the calculator provides precise figures based on input values.