Pay Off Your Mortgage Sooner - Free!
Posted: Saturday, December 11, 2004
by ScottyB
Internet-Bargains.com
Many people don't realize they can pay off their mortgage earlier without spending a dime extra. And it involves no paperwork or extra hassles either.
To make this work correctly, your loan must have NO prepayment penalty. If there is a penalty for prepayment, well, why did you get that loan?
Paying off your mortgage early is very simple. Take your current monthly mortgage payment and divide it in half. Pay half your mortgage on the 15th of each month, and the other half on the last day of the month. That's it.
"But I won't have a tax deduction after that," is the biggest comment I get. SO WHAT? You won't have a mortgage payment every month, and that is money in your pocket.
As a word of caution, many banks will try to trick you into using exactly this method but will charge a "set up fee" to allow you to do this. But if you were smart in finding your loan, you already know that there are no penalties for prepayment, and you can establish the two week method on your own.
ScottyB authors the money saving websites Internet-Bargains.com and FrugalFriend.com
This Article has been viewed 5,605 times. (Not updated in real-time.)
Top-level comments on this article: (8 total)so, if I pay my mortgage every week, I can pay it off even sooner?
Very much!!
[[Pay half your mortgage on the 15th of each month, and the other half on the last day of the month. That's it.]]
This is not the same as paying every two weeks. The method you describe, quoted above, if the bank applies your payment when you send it rather than waiting till it has a whole payment (which most do), will save only 1 month out of a 30 year loan.
Biweekly, on the other hand (what you seem to be talking about in the second part of your blog) saves about seven years. But the bank has to agree to it. Usually they save half and post a full payment at a time (not always). But the 13th full payment is added to principal only.
Not quite. I was doing that and the mortgage company was not applying the payments as they arrived they were holding it until the full monthly payment was received. How can that be avoided?
The only way you can get the lender to apply your payment when you send it is to get them to agree to it. If they have a free biweekly payment plan, take it. But don't spend $300-$400 for one. "Anonymous (128 days 20 hours ago.)" is exactly right about what you will and will not save.
Another cool way to accomplish similar results without extra costs is to divide your payment by 12, and add that 1/12th amount to each full payment, marked "for additional principal only." Over the course of 12 months, you'll add one full payment to principal only. The savings is about 7 years, similar to the biweekly.
Lin Ennis, author of Let Your Mortgage Make You Rich
founder of The Great Mortgage Revolt
I've been doing this for the last 9 years and it's amazing! I have linked to your site on my website because it is exactly what my topic was about for my real estate website tonight.
this is incorrect!! The only way is to split it by two and pay fortnightly due to the fact that there are 26 fortnights per year rather than 24 if you were paying twice monthly.
The way to make this work is to make one additional mortgage payment during the year. 13 instead of 12 payment. Divide your monthly payment by 12 and add that amount each month. Don't pay for bi-weekly plans.. they are not needed. I know...this because I used to be in the mortgage business.
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