Paying mortgage bi-weekly reduces the 30 yr loan to 23( is this true?). My bank wont allow biweekly payments.?

Question

What should i do ? what other tips can you give me?

Answer 1

You can increase the amount you pay once a month on your mortgage. It will have the same effect as paying twice a month

Answer 2

Make sure you don't have a prepayment penalty provision in your loan. If you don't have a prepayment penalty then you can send in an additional check each time you make a payment to be applied to the "principal only." A separate check that is clearly marked is the best method.

If you have an amortization schedule you can do what I have done in the past and pay the principal amount (by separate check) on the following month each time you send your regular payment. That way you know exactly where you are by keeping careful records.

In the beginning this method works very well because the interest is a large, large portion of the payment and the principal is small. As you pay down the mortgage the opposite will become true and you may not be able to keep up, but you can begin sending a fixed amount each month.

I think your lender will accept the payments to principal only and you will achieve your purpose of paying down the loan in the 23 year time frame or even less.

Answer 3

1st of all, don't worry about prepayment penalties. The longest one I've ever seen is only good for 5 years. Unless you plan on paying off your home in 5 years, forget the above mentioning of prepayment penalties.

As for the amount of time it takes to payoff your mortgage, the timing of your payments is very critical. Mortgages calculate interest based off of an average daily balance. The whole point of making a half payment every two weeks is to constantly be reducing your average daily balance so that the mortgage can't accrue interest properly. It also sneaks in an extra full mortgage payment since you send 26 half payments or 13 full payments in a year. If you simply sent a full extra payment at the end of every year, there's two problems here. 1. Most people don't manage money well enough to just have an extra mortgage payment.
2. Your mortgages average daily balance will be higher throughout the year which means that the interest that accrued on it will be higher which means it will take longer to payoff the mortgage.

here's my recommendation. Go online with whoever you have our checking account with and set up automatic bill pay to send bi-weekly payments to your mortgage holder. If your bank isn't sophisticated enough to do this, take five minutes to research other banks in your area that do. Almost all of them can do this. By the way, the mortgage company will automatically apply the extra money to principal unless you are behind on your escrow or payments...

Also, if you don't do this month after month after month, you won't see the benefits. many clients of mine are good about it for a year until they start receiving statements that show they are 1 or 2 payments ahead and decided not to make a payment that month... there will be a point where your mortgage statement will say you aren't due for a payment for 6 years... that's the whole point of this thing, but it's tempting not to pay.

Also, is your mortgage leveraged properly? You might want to talk to a mortgage professional to make sure your home is doing the right amount of financial work for you. You can certainly call me if you want or visit my site at CaseyCasperson.com. I'm licensed nationally with Chase.

Answer 4

You're comparing apples and oranges....just a little bit. You are making 12 double payments and asking if you should make 24 single payments, one on the 1st and one on the 15th of each month, right? Well, the great savings from bi-weekly mortgage payments comes from that fact that there are 52 weeks in a year, so if you pay every other Friday (for example), you actually make 26 payments a year. So the savings from bi-weekly payments comes from making an extra full payment every year ("the thirteenth month"). If you were to do a full payment on the 1st and the 15th, you would save tons; but if you did a full payment every other week, you would save even more because you would make 26 payments per year, rather than only 24. This works for a lot of people, from a budgeting standpoint, because of weekly or bi-weekly paychecks...

Answer 5

You can get roughly the same effect by making one extra mortgage payment annually at the end of the year (or at any other time as well).

Biweekly payments are not allowed by all lenders, since their systems may not be set up to handle what you want to happen. You can get a similar effect by adding a given amount of dollars to each payment, thus reducing your principal more than normal.

Answer 6

If you bank won't allow monthly payments, just make it on top of your regular payment.

So say if your payment is 1500.00 per month. Then send an extra 125.00 a months. The trick to bi-weekly payment is the 13th payment. When making bi-weekly all your doing is adding one extra payment per year. So diviede 1500/12, you get 125.00.

MAKE SURE""""" you tell the bank to apply the extra monies to principal not interest. Write a seperate check out and add on the memo line to go to principal only. Call the bank ahead of time and let them know.

This can cutt down years on your mortgage.

Hope that helps.

http://www.myfinancialcorner.com

Answer 7

Bi weekly payments basically tricks you into adding an extra mortgage payment a year.

Instead you can....Add one more payment a year or divide your monthly payment by 12 and add that to each monthly payment.

Answer 8

Your bank wont allow one of those programs that you about $400 to have 1 extra payment a year, but unless you have a prepayment (and it would have to be a a strict one) you can always do it yourself by just making one extra "principal payment per year. Write "principal" on the memo part of your check when you send it in. Hope this helps!