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— Slide 5: Three Types of Accelerated Programs —

Automatic Draft:
where you send in a lump sum payment on a scheduled bases: illustrated in the previous slide

Bi-weekly Accelerated Payments:
you pay half of your mortgage payment every 2 weeks.

  • Example:
    if your monthly mortgage payment equals $699.21, you will pay $349.61 every two weeks under the bi-weekly accelerated payment schedule.

    This equals to 26 bimonthly payments, or equivalent to 13 monthly payments instead of the standard 12. You will payoff your 30-year loan in 23 years and 3 months, saving you about $40,000 in total interest.

  • You can reduce your loan in the same way by prepaying an additional 1/12th of your monthly payment each month as a lump-sum payment.

    you can add on $58.27 to your monthly payment. You will payoff your mortgage in about 23 years and 3 months, saving you about $40,000 in total interest.

Refinance Your Mortgage:
you can payoff your mortgage faster by refinancing at a lower repayment term; i.e., refinance from a 30-year to a 15-year term.

Understand that when you lower the term from a 30-year to a 15-year mortgage plan, your monthly mortgage payment will increase - see sample below.

If you kept your 30-year mortgage and instead made a monthly lump payment equal to the net payment increase, you will get the same payoff benefit.

Of course, lower repayment terms mean lower interest rates, so the benefit will be greater. However, it costs money to refinance your mortgage. So any benefit from a lower rate may be offset by the costs to refinance.

view this home refinancing break-even calculation to estimate your cost to refinance

$100,000 Mortgage
30 Year Term - 6% APR

Refinancing Terms
30-Year Term
15-Year Term
Monthly Payment $599.55 $843.86
Net Increase N/A $244.31
Monthly Lump Sum Pay $244.31 N/A
Total Interest Saved $63,944 $63,944
Mortgage Payoff Time 15 Years 15 Years

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