Chances are you have heard about bi-weekly mortgages. Some lenders even have programs for you to sign up for, some with fees, in order to gain the benefits of the bi-weekly mortgage.
Basically you can save thousands of dollars on your mortgage and shave years off of the term as well. It is possible to achieve this on your own and with greater personal control and planning. Make sure your loan does not have any pre-payment penalties before you change your payment schedule.
You normally make 12 payments per year. With a bi-weekly mortgage because there are 52 weeks in a year, and you make 1/2 of your full payment every two weeks, you are making 26 half amount payments or 13 full payments for the year.
You can accomplish making that additional one payment per year simply by dividing your full payment by 12 and adding that amount to your monthly payment.
$1300 monthly payment / 12 = $108.33
$1300 monthly + $108.33 additional = $1408.33 new monthly payment
In one year paying that additional monthly amount you will have paid one full additional mortgage payment for the year to make 13 payments.
How much will you save if you make this additional payment per year?
On a $205,674 loan at 6.5% for 30 years you will pay $262,325 in interest.
Paying the additional $108.33 a month to give you one full additional payment per year would reduce the term to 24.15 years and reduce the interest to $202,505...a savings of 5.85 years and $59,820!!!
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