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Paying Off Your House Early…
Did you know that you could really pay off your home 6-8 years ahead of schedule?
Bi Weekly Payment Advantages:
The good news!
By making a payment every other week, you are actually making 13 monthly payments instead of the customary 12. Depending on the terms of your loan, one extra payment a year may enable you to pay for your house an average of six to eight years ahead of schedule.
Myths: What you need to know!
Myth No. 1: Paying your mortgage twice a month gives you better credit.
Lenders report your account status once a month, so you are still counted as making a normal, on time payment.
Myth No. 2: Paying twice a month reduces the compound interest on your mortgage.
Wrong!!! In fact, even though you are paying biweekly, it is likely your loan servicing institution is paying your loan monthly. This means that you are actually loaning the servicing company half of your mortgage payment — interest free — for at least two weeks every month.
Three ways to pay down that extra principal:
1) Pay an additional one-twelfth of your mortgage each month. Designate on your coupon that the amount should go against the principal.
2) If you get a tax refund or bonus each year, add the extra payment to your mortgage, informing the bank that the additional money goes toward the principal.
3) If you get paid biweekly, take half of your mortgage payment from each check and put it in a savings account. At the beginning of the month, write your mortgage check from that account. At least twice a year you’ll be including the equivalent of an extra half- payment. Be sure to identify on the mortgage coupon that the additional money goes against principal.
As a mortgage professional, I like to share knowledge that may benefit your financial position. Please be sure to ask any questions that you may have. I am grateful to be a resource for you, your family and friends.