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 26 years and 2 months. This will save you 3 years and 10 months. But, the savings doesn’t end there.

If you took out a $250,000.00 loan with an interest rate of 3.500% and your federal tax rate is 26.000%, you can expect to pay $1,122.61 per month, while a bi-weekly payment plan will call for a payment of $131,676.52 every other week. As a result, you will pay only $131,676.52 in interest with the bi-monthly schedule rather than $154,140.22 with the standard payment plan. While this will result in a loss of $5,840.56 in tax benefits, you will still save a total of $16,623.13 with the bi-weekly plan.