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# Time Value of Money TutorialsTVM Calculations

## How to Calculate Biweekly Mortgage PaymentsTutorial 15

Biweekly mortgages are popular with some borrowers because they reduce the amount of interest due when compared with a conventional mortgage that has monthly payments. Why? The payment amount is 1/2 the periodic monthly payment and it is paid every other week. This results in 26 payments a year, or the equivalent of 13 monthly payments. The impact of this is principal is prepaid and therefore the amount of interest paid is less than it otherwise would be.

This example applies to our online Ultimate Financial Calculator. The C-Value! program for Windows works in a similar way and has a few more features including the ability to save your work.

All users should work through the first tutorial to understand basic concepts about the calculator.

To create a bi weekly amortization schedule, follow these steps:

1. Set "Schedule Type" to "Loan"
• Or click the [Clear] button to clear any previous entries.
• The top two rows of the grid will not be empty
• Delete the 2nd row by selecting it and clicking on the [Delete] button
2. Set "Rounding" to "Adjust last amount to reach "0" balance" by clicking on the {Settings} {Rounding Options}
3. In the header section, make the following settings:
1. For "Calculate Method" select "Normal".
2. Set "Initial Compounding" to "Monthly".
3. Enter 6.25 for the "Initial Interest Rate".
1. In row one of the cash flow input area, create a "Loan" series
1. Set the "Date" to December 1, 2016
2. Set the "Amount" to 375,000.00
3. Set the "# Periods" to 1
• Note: Since the number of periods is 1, you will not be able to set a frequency. If a frequency is set, it will be cleared when you leave the row
2. Move to the second row of the cash flow input area
1. Select "Payment" for the "Series"
2. Set the "Date" to January 1, 2017
3. Set the "Amount" to "Unknown"
4. Set the "# Periods" to 360. Payment are first calculated as if they are based on a 30-year loan
• Your screen will look like this:
1. Calculate the unknown. The result is \$2,308.94 for the regular monthly payment
1. Prepare to calculate the biweekly term
1. Reset the "Initial Compounding" in the header to "Biweekly"
2. Click on second row of the cash flow input area
3. The Series will already be "Payment"
4. Reset the "Date" "December 15, 2016 (first biweekly due date)
5. Reset the "Amount" to \$1,154.47 or half the value of the monthly payment calculated in Step 6 above
6. Reset the "# Periods" to "Unknown"
7. Reset the "Frequency" to "Biweekly" (See note below)