Standard vs. Bi-Weekly

When you set up your mortgage payment repayment plan, you can choose between a standard repayment plan or a bi-weekly repayment plan. With the standard plan, it would take you 30 years to repay the loan while a biweekly plan will take 24 years and 4 months. This will save you 5 years and 8 months. But, the savings doesn’t end there.

If you took out a $250,000.00 loan with an interest rate of 6.250% and your federal tax rate is 28.000%, you can expect to pay $1,539.29 per month, while a bi-weekly payment plan will call for a payment of $235,659.11 every other week. As a result, you will pay only $235,659.11 in interest with the bi-monthly schedule rather than $304,145.48 with the standard payment plan. While this will result in a loss of $19,176.18 in tax benefits, you will still save a total of $49,310.19 with the bi-weekly plan.