Getting out of debt and mortgage free seems to be on everybody’s mind with these low mortgage rates. In fact there is a lot of truth to making a biweekly mortgage payment. A Biweekly mortgage payment is in essence doubling up on your payments to pay off your house faster. Calculate your mortgage payment.
One simple way of doing it is simply making an extra principal prepayment every month.
To really maximize the effects of a biweekly mortgage payment, you need to be consistent.
Here are the two ways to effectively reduce your mortgage interest by making biweekly mortgage payment on your home loan.
1. Make an extra mortgage payment every year. Seems easy enough right? Let’s look at an example.
Looking at $225,000 loan at 4.25% on a 30 year fixed rate loan the monthly payment is $1107 per month. Making an extra payment on that mortgage loan every year would allow you to pay off the loan in 25.92 years and save $26,994 in mortgage interest.
You will shave off 4.08 years on your mortgage pay off by making 13th payment every year on your home loan.
2. If making an extra mortgage payment every year doesn’t sound very fun, you have another choice which is to make a 1/12 of your mortgage payment on top of your payment due each month.
Looking at the same example you will shave 4.25 years off your mortgage payoff and you’ll save $27,996 in interest. Let’s revisit: the mortgage payment is due is $1107 per month we simply divide that by 12 months which equates to $92.25 per month. We add the $92.25 per month to the mortgage payment is due $1107, this means you if you pay $1200 per month instead you will realize the savings.
Making a biweekly mortgage payment sounds like a great idea!
Well it is a great idea you are shaving years off your mortgage by paying slightly more than what is due each month or doing it one lump sum annually. If you can do it monthly consistently your interest savings over time is greater.
Note: your mortgage servicier (the company you are making house payments to every month) likely will not set up a biweekly mortgage payment for you through their system. Why not? It’s simple they lose.
When you start paying down your principal balance by more than what is required, banks don’t like that because they get less interest over time. Make no mistake, the bank wants to earn income off the interest you are paying them monthly, annually over the term of the loan. They want you to have the loan for the full term, 360 months.
Biweekly mortgage payments allow you to save thousand dollars of interest over time.
Yes, it’s true as long as you consistently make that extra 13th payment per year or make an extra monthly principal prepayment you’re in the clear.
Here’s some homework for you find your principal and interest payment on your mortgage statement.
Divide that payment by 12 which represents 12 months a year and take that 1/12 payment and start making it every month when you make your mortgage payment.
Curious about biweekly mortgage payments? Get a free mortgage rate quote.
Call Scott Sheldon Santa Rosa Mortgage Lender and he can walk you through the steps and show you the interest saved. Scott has over six years of mortgage experience and can show you how to chip away at that mortgage. Learn how biweekly mortgage payments can save you money.