Bi-Weekly Mortgage Payments Save $$$

Thursday, July 5. 2007

My friend William sent me a link to a Bi-Weekly Payment Mortgage Calculator. It will help you determine how much money you'll save in interest over the life of your loan since principal is paid-off faster and interest is accumulated slower.

He writes:

"Never thought about this... Paying your mortgage bi weekly as opposed to monthly can save you lots of money over the course of the loan. This of course depends on any charges you have to pay to make the payments etc, but worth looking into i suppose.

I agree. I've known people who made bi-weekly mortgage payments and succeeded in paying much less interest. It's important to make sure you aren't paying penalty fees for early payments, though.

Posted by Alex Fisher in Websites & Tools at 18:42 | Comments (2)

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Part of the trick to this is that you are making an extra payment, so you are actually putting in more money each year. All that extra money goes against principal, not interest. But, as the principal comes down, the interest comes down as well, so the payment is even more against the principal.

It's a good idea. My recommendation would be to lookat how you are paid (biweekly and bimonthly are the most common, but many people are still paid weekly). Make an automatic payment the day after the money arrives. This is easy to enter in your checkbook (enter it the same time you enter the deposit), and because the money never really went into your checking account you don't notice it as much.

#1 Mike Kruger (Homepage) on 2007-07-07 23:03 (Reply)

I am in the mortgage industry and I can tell you most loan servicers are going to charge a $200 - $350 fee to do the bi-weekly payment. You can accomplish the same thing by making an additional principle payment equal to 1/12 of your mortgage payment. The concept of a bi-weekly is that you will make 13 payments as opposed to 12.

For example:

If your mortgage payment is $4800/mo, divided by 12 = $400. Make that additional payment once per month and it will save you the same as doing a bi-weekly payment.

Now if you do not have the extra income to make the payment each month, then paying the fee makes sense. If you do have the additional income, the extra fee that is charged for the set-up is a rip off.

Hope that helps.

#2 Michael Tano (Homepage) on 2007-07-08 18:23 (Reply)

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This is a personal finance blog for young professionals learning to manage money, to become financially independent, and to give back to the world. (more)

Hi, I'm Alex Fisher-- an Entrepreneur and Engineer in Metro Detroit.

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Bi-Weekly Mortgage Payments Save $$$

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Thursday, July 5. 2007

Bi-Weekly Mortgage Payments Save $$$

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