Pay off your mortgage 5 years 5 months sooner

Jul 2, 2008 Author: Daniel | Filed under: Finance

(No Ratings Yet)

Loading ...

If you have a mortgage, you’d know how much you wish you could pay that damn 30 year mortgage sooner. We’ll unravel the way for you to do it without having to do much more than what you already have or paying extra fee. We’ll also unmask how those “Bi-Weekly” payment plan can fool you into paying them for something you can do all by yourself.

Your mortgage company maybe offering you a bi-weekly payment program that promises to save up to 5 years and 5 months on a $100,000 30 year loan at 6%. To do this, they’ll charge you about $300 per year (more or less) for deducting bi-weekly payments out of your bank account. Since you thought you’re gonna save 65 months worth of repayment, $300 would be a small price to pay, right? Wrong!!!! Essentially, the ads are truthful though.

Here’s a simple low-down. Normally you’d make 12 payments each year over the 52 weeks in a year. if you join a Bi-Weekly mortgage payment program, it requires you to pay 26 half-payments. In essence, 26 half-payments equal 13 full payment. Wowsa!!! You’re actually paying 13 months of mortgage payment instead of 12 each year. As a result, while you think the bi-weekly program is saving you interest because you think the bank amortizes your loan every 2 weeks, when in fact, the loan is amortize quicker because you put in more money. And as a result, you reduce your mortgage payment term by 65 months.

You see, in your regular mortgage program, you cannot simply send them half-payments, they’d simply send it back to you, so the bi-weekly program simply won’t work. Well, in a bi-weekly program, the intermediary company would collect your money once every 2 weeks, and would only be paying to the mortgage company every 4 weeks (or every month). Eventually you’d accumulate enough money for that extra month payment. The bad news is, on top of the fees that charge you, they also make interest income for the 2 weeks lag that they collected your money, sitting there, waiting for the next 2 weeks before they make the due mortgage payment.

As a result, in order to save yourself 65 months and without paying these jokers, all you have to do is to save up your own 13th month payment, and make that payment every year. What you need is some self-discipline and you’d save yourself alot of money on mortgage payment and fees.

Bookmark this