One way to pay off your mortgage faster is to make bi-weekly mortgage payments instead of monthly ~ this can save you hundreds of thousands of dollars in interest over the long-term as well as allow you to make paying off the mortgage less of an endurance test. If your mortgage is amortized correctly over the 26 weeks, then you can take years off of the time it would normally take to pay your 30 year mortgage off and save a huge amount of money in interest payments.
As times are a little tougher more and more lending institutions are trying to help consumers by offering bi-weekly and even weekly options to homeowners so they can pay off the mortgage faster.
Here is an example of how this can work; let’s say your mortgage payment is $800 dollars per month, so you’re paying $9,600.00 per year. If you pay bi-weekly payments (26 payment of $400.00) you actually end up paying an additional $800 per year, or one full extra payment that comes directly off of your principal.
On a $200,000 mortgage at 5%, you’ll pay off the loan in 25 years, vs. 30 and shave off more than $34,000 in interest cost!
Many lenders offering bi-weekly payments have mortgage calculators right on their sites that can help you figure out if shortening the length of your mortgage by paying biweekly will work for you.
This is a simple plan to quickly reduce your mortgage debt offering you additional equity/security to make it through future rough periods, like the period we’re just coming out of.
Keep in mind most lenders also allow you the option to make lump sum payments towards your mortgage principle if you come into extra money. Check with your lender to see if there are any restrictions, and always ensure your extra payment is marked “principle only” to ensure it is applied as a principle reduction vs. an interest payment.
With today’s low interest rates its always tempting to refinance, and refinance again, and refinance again… with each refinance may come a slightly lower payment, but it also comes with a new “30 year term”, you’re starting over again. It may be much more prudent to use a bi-weekly mortgage plan or additional principle lump sum payments to reach your goals.
There are sites like www.GayMortgageLoans.com that are free databases of gay, lesbian and gay friendly mortgage lenders and brokers if you need assistance, and always check with your financial planner or CPA for the best path to meeting your financial and retirement goals.
Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com. Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast offering FREE Buyers Representation.