- As always, click on the link above, and download an Excel version copy to your Desktop by clicking File –> Download As –> Excel.
- On the Monthly Payments tab
- Enter your specific property purchase details – interest rate, loan term, home purchase price, and expected downpayment. The model will then automatically calculate the loan principal amount in Cell A2.
- Next, use Excel’s Solver function to solve for the monthly mortgage payment that makes the principal amount remaining in Column G a value of “0” after the number of payments to fit your situation (either 360 for a 30 year mortgage, or 180 for a 15 year mortgage), by changing cell D2 (the 1st monthly payment cell).
- This will then find the correct monthly payment amount that you should expect for your loan amount. Additionally, it will calculate the total home equity you will have after 1 year of monthly payments and the total cost for the mortgage over the specified loan term.
- On the Biweekly Payments tab
- The loan specifics you input in the Monthly Payments tab will automatically be carried over. A biweekly payment plan set up fee of $400 is also applied (see section below for more information).
- Additionally, as is the rule for biweekly payment plans, the monthly mortage payment you calculated using Excel’s Solver function will be divided in two and become the mortgage payment you will pay every 2 weeks (total of 26 period payments per year).
- The spreadsheet will automatically calculate your total home equity after 1 year, the total cost of the mortgage, and the amount you would save by switching to a biweekly payment plan.
- To find the time it takes to pay off the loan using the biweekly mortgage plan, just scroll down the page in Column G, and find the last positive principal amount remaining value. Once you have found that, record the corresponding period in which this occurs, and that will give you the period in which you will pay off your loan.
- To find the number of years this will take, simply divide by 26.
I would accumulate $600 more equity in the first year of home ownership by using the biweekly mortgage plan, given the same downpayment.
I would pay off the home loan in 25 years instead of the normal 30 years with the monthly payment plan.
Using the monthly payment plan, the $95,000 loan would end up costing me a total of ~$194,000.
Using the biweekly payment plan, the $95,000 loan would end up costing me a total of ~$174,000.
This would result in a savings of ~$20,000 for only this small loan amount! The magnitude of savings would be even greater for larger loan amounts!
Are there any fees involved in setting up a biweekly payment plan?
Because of this added fee, you will want to analyze your situation to make sure biweekly payments are the best thing for you.
When would I not want to use the biweekly mortgage payment plan?
Using the biweekly payment plan (including a $400 one time set up fee), over the 5 years, I would pay a total of $35,461 in biweekly payments, resulting in an additional $10,273 accumulation of equity (on top of initial downpayment).
Using the monthly payment plan, over the 5 years, I would pay a total of $32,364 in monthly payments, resulting in an additional $7,162 accumulation of equity (on top of initial downpayment).
So, in my situation, since I am accumulating an additional $3,111 by using the biweekly payment plan, this definitely warrants the addtional $3,097 expenditure needed to make it happen.
I hope this post helps you understand the biweekly mortgage payment world a little bit better! Please let me know if you have any questions.
Keep on learning!
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog: Subscribe to My Money Blog via Email