The Mortgage Secret That Could Save You Thousands

Real Estate News Article

< Back

The Mortgage Secret That Could Save You Thousands

Written By: Jaymi Naciri
Sunday, August 9, 2020

So whats the big secret? Paying your mortgage twice per month.nbsp;

We know what youre thinking: How does paying double save me money? Let us explain. Paying twice per month doesnt mean making the entire monthly payment twice. It means paying half of the total every two weeks.nbsp;

The practice is called bi-weekly mortgage payments, a strategy where mortgage loan customers pay their mortgage loan every two weeks, instead of once a month, said Experian. The idea is to chop down your mortgage payment more quickly, and in the process, lower the amount of interest you pay on your mortgage overall.

So how does paying every two weeks cut down on your total amount and save you big time? When you pay monthly, you make 12 payments per year. Pay every two weeks, and you actually end up making 13 full payments. And that one extra payment is directed toward the loans principal.nbsp;

Since the homeowner is reducing the amount of the loan balance quicker, they are also reducing the amount of interest charged over the life of the loan, said MortgageCalculator.org.

What to ask your lender

Before you start making that extra payment, youll want to make sure its allowed. Some lenders either dont facilitate the process or dont credit the payment more than one time per month. Many lenders decide to hold partial payments in an account until the rest of it is received, said MortgageCalculator.org.

Other companies may allow bi-weekly payments but charge a fee. Ra>

How much can you save?

This scenario illustrates the type of long-term savings that make bi-weekly payments attractive. Say you have anbsp;30-year fixed-rate mortgagenbsp;for 250,000 with a 4 percent interest rate. Your monthly payment would be about 1,194, and the total interest paid over the life of the loan would be 179,673, said Bankrate. In the same scenario, using anbsp;biweekly mortgage calculator, your total interest paid over the life of the loan on a biweekly plan is 150,450.40. That means youd save more than 29,000, and pay off your loan in 25 years instead of 30.

Another alternative

If making a payment every two weeks isnt feasible, consider a lump sum payment once a year. Maybe you get a Christmas bonus, a merit bonus, or a tax refund. Using this windfall and allocating the equivalent of one mortgage payment would make a huge dent in your principal. By paying one extra payment of 1,285.33 each year on a 25-year loan of 250,000 with interest at 3.75...the loan amortization schedule with extra payments shows that you would repay the loan 2 years and 11 months earlier and save 17,381.35 in interest, said Interest.com.





Copyright© 2024 Realty Times®. All Rights Reserved

Updated: Monday, March 18, 2024

Copyright ©2024Realty Times®. All Rights Reserved

Housing Rebound: Factors to Consider
In Miami we have had an incredible year of growth with an ever shrinking supply of condos...

Hoteliers Buy Versace Mansion at Auction
Gindi Family and Nakash Family of New York were the winners of the auction for Casa Casuarina...

Stunning Estate for Sale on Allison Island
Allison Island is one of the man made islands comprising Miami Beach. One half of the island...

Avant Garde and Luxurious Penthouse on Fisher Island
Fisher Island is home to some of the highest net worth individuals in Miami. It is a private...

6000 Indian Creek, Condominium Spotlight
6000 Indian Creek is a Sieger Suarez project that was completed in 2007 and consists of...

$35 Million Buys you THIS on Star Island
$35 Million for a home on Star Island is par for the course in Miami Beach real estate....

Development Update
It is looking like a dusty winter season in Miami, with all the construction rapidly underway,...

North Bay Road Charm, 4330 North Bay Road
4330 North Bay Road is a stunning example of Mediterranean architecture in Miami Beach....

Best Home Improvements for Resale Value
It could not be a better time for a homeowner to list their home for sale in Miami. The...

Biscayne Gets a New Development
The Melo Group of developers acquired 601 NE 23rd St last year and have conceived of 23...

520 West Ave Residence 2301
520 West Avenue is home of the Bentley Bay. Bentley Bay is comprised of two modern towers...

Spice 2013, Guide 101
Miami Spice is a program whereby most of the restaurants in the city encourage people to...

Hollywood has a New Hotel
Margaritaville Hollywood is coming to Hollywood Beach and is likely to completely alter...

Sustainable Waterfront Home on Normandy Isle, 1.85 Million
Rarely on the market do we find completely sustainable, off the grid, homes in Miami Beach....

Housing Inventory on the Rise at the Close of Summer
The Wallstreet Journal released numbers via Realtor.com regarding the inventory of available...

Warm Spanish Style Home Listed on the Sunset Islands
1844 W. 23rd Street is listed on the Miami Beach luxury real estate marketplace for $11...

Former Gansevoort Getting Complete Eco-Renovation
Last year the Perry Hotel, formerly the Gansevoort, was purchased for $230 million. The...

Affordable Luxury Waterfront on Hibiscus Island
A home that is considered affordable in Miami terms for waterfront is generally between...

Bart Reines New Masterpiece Released on the Market
Bart Reines is one of the worlds most impressive modern architects living, and he has just...

New Listing on La Gorce Island
98 La Gorce Court has just been listed for sale. This over 7800 square foot home with 8...