Question:

How to speed up mortgage amortization - prepayment?

Answer:

The effective way to mortgage amortization is prepayment to the principal, or a biweekly plan. Mind it, a biweekly plan is not a bimonthly plan although the terms are confusingly used interchangeably.

Prepayment and biweekly plans help amortize your loan faster.

The biweekly mortgage amortization plans result in one additional full monthly payment per year. A similar effect is produced by adding extra monthly amount to the regular monthly mortgage payment, or making a full one-month payment once a year.

Here is a comparison of the mortgage amortization early prepayment schedules for $200,000 loan amount at 7% for 30 years.


Payment Total Interest Paid Amortization Term Interest Savings
Standard Amortization / No Prepayment $1330.60 monthly $ 279017.80 30 years $ 0
Biweekly Plan $665.30 weekly $ 213321.07 24 years $ 65696.73
$100 Monthly Prepayment Combined W/ Biweekly Plan $665.30 weekly + $100 monthly $ 176642.42 20.42 years $ 102375.37
$2000 Annual Prepayment $ 1330.60 monthly + $2000 yearly $ 192066.78 22 years $ 86951.02
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