Mortgage Priviledges - Monthly or Weekly?

Monthly Mortgage Payment

A typical monthly mortgage consists of equal monthly payments of both principal and interest. As payments are made the principal owing is reduced, each subsequent interest payment is also lower as a result. Over time more and more of the equal payment is applied to principal reduction, until the mortgage is completely repaid. A mortgage is usually calculated to be paid off over 25 years, however any repayment period (amortization) is possible. The amount of interest paid is a result of the interest rate, the compounding frequency and length of time it takes to repay the loan in full.

Mortgages have traditionally been paid on a monthly basis, same as rent. In recent years financial institutions have offered flexible payment options. These include the availability of Weekly, Semi Monthly, and Bi Weekly payment plans in addition to the conventional Monthly option.

There are no great savings in the amount of interest paid between the various payment plans, except for the accelerated options. When choosing a payment plan you should consider convenience and practicality. If your salary is paid on a monthly basis, a monthly payment is probably the way to go. If you are paid semi monthly or every second friday, the Semi Monthly or Bi Weekly options may be best.

Accelerated Plans.

An Accelerated Payment Plan is a great way to save thousands of dollars of interest and be mortgage free years earlier. The savings are a result of the additional principal amounts paid each month. Any payment plan can be accelerated, simply by pre-paying an amount each month or decreasing your amortization. The most common accelerated plan is the Bi Weekly payment option due to the easy payment increase.

Bi Weekly Payments

The above chart shows that the "Monthly" option requires a monthly payment of exactly $1,000. The annual sum of these payments is $12,000, calculated as twelve multiplied by $1,000. When choosing an Accelerated Bi Weekly payment plan the borrower agrees to pay one half (1/2) of the monthly payment 26 times per year. With the accelerated Bi Weekly plan the borrower will be paying the equivalent of one extra monthly payment, $1,000, each year. The result is faster repayment of the mortgage, "accelerated", and the consequent interest savings.

The Reason

There are 26 Bi Weekly payment periods in a year. The borrower agrees to pay $500, half the monthly payment, 26 times per year. As such their annual sum of payments is $13,000 (26 payments x $500 = $13,000). This is $1,000 more than the annual sum of monthly payments. This additional payment of principal is the reason for the spectacular savings in interest of $55,217 and the luxury of being mortgage very soon.

What are you Worth

Most people don’t like answering this question. Yet once in a while, it hits us in the face.

We are asked when we visit the bank to request a loan, when we ask for other forms of credits and when we apply to professional associations and clubs. What is your worth?

Private Mortgage Wealth is not about the integration of your visible and invisible assets, which create your net wealth. The variables included in the determination of net wealth include your job or business status, spiritual health, financial net worth (which this book is about), emotional status, physical health, happiness, knowledge, balance, love, credit, personal outlook and many other attributes. When these are integrated, we have a number called “net wealth”. Even if you flunk your net worth breathalyzers, you cannot score below zero in your net wealth. If you think you did, now you have the opportunity to better your score. Net wealth calculation goes beyond this book, so we are not dwelling on it.

Here, we’ll deal with one of the variables in determining net wealth – net worth – and how you can increase it using private mortgage investing. Do you know what you are worth financially? What about your family’s financial worthiness? Your net worth is a financial snapshot of your financial health – or ill health – at that moment in time. If the picture is taken properly, the snapshot gives a number that represents your financial health. Do you know your number at this moment? You should.

Jeff Opdyke in the Wall Street Journal Complete Personal Financial Guidebook says,

“It forces you to interact with your financial life, keeping you in touch with your money and knowledgeable about where you are on the road to where you think you are going,” if you have decided to go anywhere.

Better off with Variable Mortgage

The average mortgage borrowers believe fixed low mortgage interest rates over a long time is better but it is very costly. Studies suggest, locking in cost more. The vast majority of homeowners and potential homebuyers think mortgage rates have gone as low as they are going and feel the best strategy is to lock into a fixed term. According to York University, Schulich School of Business professor, Moshe Milevsky in 2001 "Consumers are better off, on average, financing a mortgage with a short-term floating prime interest rate compared to a long-term fixed rate," The study, covering the period from 1950 to 2000, found Canadians would have saved a whopping $22,000 in interest payments on a $100,000 mortgage amortized over 15 years by borrowing at prime rather than the five-year rate.

Paul Mims, vice president, mortgages and lending at CIBC agrees with the study saying, “Homeowners save more over the long term with a variable-rate mortgage," So the security of a fixed rate is not always the best way to reduce the cost of financing your home.

Facts:

× Interest rates, including mortgage rates, are now at their lowest levels in more than 40 years and close to the lowest levels many have ever witnessed, 82 per cent feel they won't be going lower, the poll results suggest.

× Roughly one third suspect rates will be higher a year from now and just under half expect they will be the same, according to the poll by Decima Research of 1,267 adults, which is considered accurate with 2.8 points 19 times out of 20. Only seven per cent expect mortgage rates will be lower a year from now.

× 64 per cent believe the best mortgage strategy is to lock into a fixed rate and only 29 per cent would go for a variable-rate mortgage.

× The rate on a fixed-rate mortgage is significantly higher than on a variable-rate mortgage. If the posted rate for a five-year fixed rate is 4.2 per cent, while its variable-rate mortgages can be had for less than the 2.5 per cent prime rate.

Further, homeowners can always switch their variable-rate mortgage to a fixed rate at any time without penalty. And rates aren't going to soar unless inflation does first. Considering the trillions of dollars the government have pumped into the economy of the world, inflation is sure to come, so variable mortgage holders should watch out for it. The odds of doing better by going for a variable rather than a fixed rate ranged from 75 per cent to 90 per cent.

About Private Mortgate Wealth

Private Mortgage Wealth gets you quickly acquainted with simple strategies using mortgage investments to enhance your bottom line. Within Private Mortgage Wealth you‘ll discover:

• Simple and easy-to-understand terms about the mechanics of the mortgage lending industry and how deals are made;
• Practical guide to getting started in the mortgage lending industry and guidelines for attaining above average returns on investments;
• The importance of mortgage risk analysis, due diligence processes, lending policies, compliance plans and strategies for capital preservation;
• The roles and responsibilities of lenders, mortgage bankers, mortgage brokers, mortgage administrators and loan service companies in mortgage investing;
• Valuable guidelines for avoiding lending pitfalls;
• Real life scenarios in a step-by-step method from concept to completion that make simple what can be complicated; and
• Simple strategies for increasing your net worth

Private Mortgage Wealth cuts to the heart of successful mortgage investment, providing readers with a complete understanding of private mortgage investing fundamentals. It shows how to use direct investments, syndicates and investment clubs to get into the private mortgage investment business and mortgage borrowers are provided with insight on how mortgage lenders make lending decisions.

Contact Information: To arrange for interviews, contact RIMI Publishers at 416-548-7870 or info@privatemortgagewealth.com. For more information and book purchase, visit: www.privatemortgagewealth.com.