Does it save me money to pay our mortgage payment every 2 weeks?
happydawg Asked: Does it save me money to pay our mortgage payment every 2 weeks?
We bought a house in October, and I decided it would be easier on me to have the mortgage payments taken directly out of my checking account every other Friday.I think 2 or 3 months out of the year it ends up being 3 payments a month.
Our mortgage is a fixed 4.25 over 30 yrs.I paid $100 to do the paperwork to have the automatic deduction taken out of my personal checking account.
The every other Friday payment is $538. 17.This includes property tax which is going to dramatically go up this year since we bought the house off a deceased elderly gentleman who had all kinds of exemptions.We will only have owner occupied exemption.
The mortgage lender told me paying the monthly payment in 2 or 3 installmentswould cut about $25,000.00 off the amount of the loan.
Did I screw this up, or is it better to pay every 2 weeks?Im always very nervous about crooks.
Answers:
Depends on your lender's regulations. Some lenders will hold the payments till the end of the month and lump it together so advanced payments doesn't help unless its more that a full months worth. BILL PAY is free and you can set your bank to pay out anyone/company every 2 weeks… don't know why it cost you $100. Call your actual mortgage lender.
google loan amortization calculator and play with the numbers.You end up making an extra payment each year and the principle drops faster.look at the amortization schedule and you will see how the payments are applied.This could potentially save you a lot of money in the long run, but as you pointed out, you will pay a little more each year.
If your mtg co applies the payments as you make them, you save a lot paying every 2 weeks b/c you are actually making 1 extra payment every year.
The installment method saves very little to nothing, depending on if the payments get posted as received or just accumulated and posted on the first, as if you had only made one payment.And of course, you are only making 12 full payments in each year.{meaning the mtg lender guy is wrong; maybe misunderstood, or something …..}
Property taxes will be set and adjusted yearly by the mtg co; and should take your pmt schedule into consideration ( i e 26 per year).
By doing this you are paying 13 "monthly" payments per year rather than 12.So yes, you will save money because you will pay it off more quickly.You could have done the same by just sending in an additional payment every year and saved the paperwork fee (ie a rip-off).