Mortgage payments

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Someone once told me that if I paid my mortgage twice once a month I would come out ahead. I get paid no the 1st and the 15th and am thinking about paying half out of each...is this person right? Will I come out ahead somehow?? Can you explain this me?

GuavaGal

There's a pretty good explanation of how this saves you money:  here.

Basically, because you're making a payment every two weeks instead of once a month, you end up making 13 payments per year instead of 12.  So, you end up paying down your loan faster.

You'll probably need to check with your mortgage company about making a payment every two weeks instead of once a month.  If they won't switch you (like my old house mortgage co. wouldn't), just add 1/12 of your total monthly payment to each monthly payment you make.  That way, you'll still end up making 13 payments per year.

HTH!

SaraLouiseBride08

ETA: LOL, yah, what she said

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GuavaGal:

There's a pretty good explanation of how this saves you money:  here.

Basically, because you're making a payment every two weeks instead of once a month, you end up making 13 payments per year instead of 12.  So, you end up paying down your loan faster.

You'll probably need to check with your mortgage company about making a payment every two weeks instead of once a month.  If they won't switch you (like my old house mortgage co. wouldn't), just add 1/12 of your total monthly payment to each monthly payment you make.  That way, you'll still end up making 13 payments per year.

HTH!

That's kinda what I thought but I'd still be paying the same amount since I get paid twice a month- not every 2 weeks...ya know?

jml5q

you will come out ahead if you pay more principal each month than you have to pay. For example, say your mortgage payment is $1000 a month - $800 of that is interest you owe on the loan and $200 is principal going towards paying off the actual cost of your house.

If you write a check for $1200 one month, you'll still pay your $800 in interest owed, but you're now paying $400 towards the principal instead of only $200. This way you'd be paying off your loan faster and in the long run paying less interest.

is that what you meant?

 

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SaraLouiseBride08:

ETA: LOL, yah, what she said

We were thinking along the same lines...I'm just curious.

stephriz

kerij1028:

GuavaGal:

There's a pretty good explanation of how this saves you money:  here.

Basically, because you're making a payment every two weeks instead of once a month, you end up making 13 payments per year instead of 12.  So, you end up paying down your loan faster.

You'll probably need to check with your mortgage company about making a payment every two weeks instead of once a month.  If they won't switch you (like my old house mortgage co. wouldn't), just add 1/12 of your total monthly payment to each monthly payment you make.  That way, you'll still end up making 13 payments per year.

HTH!

That's kinda what I thought but I'd still be paying the same amount since I get paid twice a month- not every 2 weeks...ya know?

I think you're right.  If you get paid every 2 weeks, you would make a full extra payment each year.  But since you get paid 24 times a year, you would still end up making only 12 full monthly payments.

But, if you slip an extra 13th payment in each year, it would dramatically reduce the amount of interest you paid longterm.

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jml5q- yeah, I see what you are saying...I might look into that.

I think I heard or understood my friend wrong. I just thought there was some secret I didn't know about if I broke it down into 2 payments every month. It won't help that much.

http://www.bankrate.com/brm/news/money-matters/20020603a.asp

jml5q

ok, nevermind. you meant actually splitting your monthly payment in half and paying it twice. i'd never heard of that. interesting. i guess it's sort of the same as paying extra principal just in a different way.

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jml5q:

ok, nevermind. you meant actually splitting your monthly payment in half and paying it twice. i'd never heard of that. interesting. i guess it's sort of the same as paying extra principal just in a different way.

nah, it's totally me just screwing up what a friend told me. I didn't think my idea sounded right but was hoping for a miracle!