Question

You want to pay off your mortgage on something called an accelerated bi-weekly payment plan (your parents told you to do this). You have a mortgage of $580,000 amortized over 33 years at a rate of 4.3 percent APR compounded semi-annually. (Assume 52 weeks a year.)

a. What would the regular bi-weekly payment be? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Regular bi-weekly payment           $  

b. What would the accelerated bi-weekly payment be? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Accelerated bi-weekly payment           $  

c. How much quicker would you pay off the mortgage payment? (Do not round your intermediate calculations. Round your answer to 3 decimal places.)

Pay off period             years

d. How much interest would you save by doing the accelerated bi-weekly payment? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Savings in interest payment           $

Answer 1

Mortgage amount	$    5,80,000.00
Interest rate	8.60%
Amortization period	33
No. of payments in a year	12
Total number of payments	396
Payments per period	$          4,417.94
Sum of Payments	$ 17,49,502.36
Interest cost	$ 11,69,502.36
Annual monthly payments	$        53,015.22
Total number of bi-weekly payments in a year	26	=52 weeks/2 weeks
Regular bi-weekly payments	2039.05	=(Payments per period*no. of monthly payments)/ Total number of bi-weekly payments
Annual regular bi-weekly payments	$        53,015.22
Accelerated bi-weekly mortgage
No. of monthly payments in a year	13	since 1 extra payment is made as a part of accelerated bi-weekly mortgage per year
Accelerated bi-weekly payments	2208.97
Annual accelerated bi-weekly payments	$        57,433.16
Amortization period	30.462
By making accelerated bi-weekly payments, you will be saving money on interest and reducing your amortiation period.

Pay-off period using accelerated depreciation - 23.625 years

Interest savings using accelerated depreciation - 395,724.56