 SAVE
MONEY WHEN YOU MAKE BIWEEKLY MORTGAGE PAYMENTS
Question:
Is it beneficial to send half the monthly payment at the
beginning of the month and the other half at the end ? Do I save
money in interest by doing that? Some companies say for a fee
they will arrange a double payment program for me, is it good?
Answer :
Never pay for what you can do yourself. As long as your note
does not require any unusual prepayment penalties, you can make
additional payments to your principal at any time. The ideal
situation would be to pay 1/12 of your payment with your regular
monthly payment, thus paying a full extra payment by end of the
year and saving thousands in interest over the term of the loan.
It is not beneficial to send the lender the payment in two
halves, first the lender will not accept your payment since it
is not the full amount, second they are not set up to accept
payments in that manner. Companies that charge to do this, often
keep the extra amount that would be applied to your principal
and earn interest on it then at the end of the year send it to
the lender to apply it to your loan. No guarantees they are not
some fly by night company that won't be there at the end of the
year to make that payment.
Changing payments?
Question:
Can I change my payment amount when I pay extra on my mortgage
or does it have to stay the same?
Answer :
You cannot actually change your payment, that is cast in stone
at the time your loan was set up, unless you have an adjustable
rate loan, then your payment will change as per the terms of the
loan. However, as your goal is to pay your loan off early, doing
it consistently every month is a good thing. So just pay the
additional amount and be sure you mark on your payment coupon
that it is intended for principal reduction.
Lenders
who do bi-weekly?
Question:
Are there lenders who offer bi-weekly mortgage payments without
additional fees attached?
Answer :
Brokers usually do not, as they sell the loans on secondary
market. Some banks do if you maintain an account with them. If
you are trying to reduce your principal you can achieve the same
results by simply sending in 1/12th of your payment with your
regular monthly payment. Be sure to indicate on your payment
coupon that the difference is to be applied to the principal
balance.
You will save loads in
interest!
How Do Bi Weekly Payments
Work?
Bi Weekly Payments do not change the current terms or
conditions of your mortgage - no one can do that, not you, and
not even your lender. Bi Weekly Payments simply changes the way
you pay your mortgage, and the way in which your payments are
applied by your lender. Instead of you writing and mailing a
check every month, ½ of your regular payment is paid every
other week. This provides you benefits and savings comparable to
converting your mortgage to a biweekly mortgage-without the
costs of refinancing (not to mention appraisals, surveys,
inspections, title searches, credit approval, changes of lender,
and the like). These added principal payments reduce your loan
balance more quickly, building your equity in your property
nearly three times faster.
Can I still deduct mortgage interest expense on my taxes?
Homebuyers often think accelerating their mortgage will cause
them to lose their tax write-off! This is a misconception. Bi
Weekly Payments lowers the interest expense on your mortgage,
it doesn't eliminate it! You still pay your lender plenty of
interest! Bi Weekly Payments reduces the total interest expense
over the life of the loan, so the impact on any one year of the
mortgage is really of little consequence. Beyond that, depending
on your tax bracket, every $1 paid as mortgage interest may only
be worth 15 to 28 cents in tax savings - provided your mortgage
interest expense and other deductions can even be itemized.
How Will Added Equity in my Home Benefit Me?
The first and biggest benefit is that an unpaid mortgage balance
is a liability, while your equity in your home is an asset on
your personal balance sheet. That asset can be used if you ever
need additional money - for education, a vacation, a new car, a
boat, home improvements, and the like. If you plan to sell your
home in a few years, your added equity can reduce the amount of
money you may need to borrow for your new home, and help pay
realtor fees, loan origination fees, appraisals, inspections,
and all those related costs.
Will My Lender Be Unhappy About the Money They Will Lose On
My Loan?
They won't take it personally! It's business. It is also not
very likely that your original lending institution still handles
your mortgage. Original mortgages are frequently grouped
together and resold to other companies and financial
institutions, which then service them. What's more, although
your lender may lose a great deal in interest profits on your
loan or mortgage, they will simply take the money you pay them
and loan it out again - like a revolving door. If you have an
average interest rate, they can probably get the same rate, if
not more, on a new loan today. If you have a low interest rate
they can certainly loan it at a higher rate today! If you had a
high interest rate, they probably expect you to refinance your
loan anyway.
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