Paying off your mortgage early (we got it wrong)

Yesterdays Irish Times carried a story in which our firm was mentioned regarding how to reduce your mortgage balance faster by paying every two weeks.

The idea of paying twice per month would give you 24 repayments whereas paying ‘every two weeks’ would result in 26 payments. It’s the same type of simple calculation error that makes people say there are 4 weeks in a month rather than 4.33 months (52/12)

If you are merely using a time period where payments add up to the same amount then the actual end results are somewhat the same, I used the formula below

M = P [ i(1 + i)n ] / [ (1 + i)n – 1]

M = Mortgage Repayment P = Principal borrowed i= interest rate (for monthly payments this works out at i/12) n= payment periods (eg: 10yrs = 120 monthly payments) And took an example of a €250,000 mortgage over 25 years with a 5% rate after which you get this

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