difference in interest by paying weekly instead of monthly

J

Jessica Derm

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Hi
I'm thinking of changing from paying my mortgage from monthly to weekly because someone told me that you pay it off quicker that way (?)

I tried to do the calcuation comparing monthly payments to weekly payments over say the term of the mortgage but I'm only getting a difference of approx €800 for interest payable over say 28 years. Does this sound correct to you? This is based on an outstanding mortgage of €310,000 over 28 years at say 4.85% fixed rate. Any advice on the calculation would be greatly appreciated. J
 
I think that some of these schemes are based on you dividing your monthly mortgage by 4 to get a weekly payment thus effectively overpaying by a month a year.
 
You need to check whether your lender will allow you to make more frequent payments - I recall asking about making fortnightly payments instead of monthly, and my lender wouldn't allow it.
 
Assuming your rate of 4.85% does not change for the 28 years, paying weekly will save you some money but not a lot. I make it a saving of €881 over the 28 years.

However if you divided your monthly payment by 4 and paid this weekly, you would effectively be making 13 payments a year instead of 12, so overpaying by €1688.29 annually.

This would shorten your term by 49 Months and save you €43K in interest.

http://www.drcalculator.com/mortgage/

If you can afford it and your lender allows it, it is worth doing.
 
I make a monthly rate of 4.85% is equivalent to a weekly rate of 4.8425% (assuming 52 weeks in a year).

So it really is only a fractional difference
 
The interest rate is 4.85% annually, whether repayments are made weekly or monthly this same rate of 4.85% is applied.

Paying weekly just means the outstanding balance is slightly lower over the term, in this case it would give a saving of around €800 over the 28 years, which works out at roughly 55 cent a week, which is only a fractional difference alright.

The big savings are made by overpaying.
 
Many thanks for all your comments. I'm with AIB and they're allowing me go to weekly repayments so I'll do that...every little helps. I'll try overpay my mortgage when I get out of my fixed rate in April 2011.
 
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