When it comes to paying off your home mortgage faster, there are many theories and ideas that populate the media and internet.
One of the more popular ideas, is that of the bi-weekly mortgage payment. Instead of paying your full mortgage payment once a year, for a total of 12 payments. The bi-weekly program collects ½ of your regular payment every 2 weeks, which means you are making 26 half payments per year or 13 mortgage payments per year.
While for many, this program is a good discipline to pay off your mortgage sooner, as it would cut four years off the life of your loan if you stuck on a bi-weekly payment for the life of a 30 year loan, in my opinion, it’s not the best option and the numbers back it up.
On a bi-weekly payment, you are making one extra payment per year, but that payment is not applied until the final month of the year, as that is when you make that 13th payment and really start getting ahead of your mortgage payment schedule.
A better way to pay off your mortgage faster, would be to take your current mortgage payment, divide it by twelve and apply 1/12th extra to each mortgage payment. By doing this, you are paying the same amount annually as with a bi-weekly mortgage payment, but right away with payment #1 of the year, you are having that extra payment money applied to your loan balance and even further cutting into the payoff time period for your home loan.
An even better practice would be to make an extra full payment towards the beginning of the year. For some, it may be a good practice to use something such as a tax refund or year-end bonus and apply that directly toward the mortgage. The sooner you apply the extra principal payment to your mortgage, the better.
When it comes to paying off your mortgage, the bottom line is that paying extra at any point will help you pay off your loan sooner, but it’s more beneficial to think outside the box of just the bi-weekly payment.
As always, if you have any mortgage related questions, it always makes sense to speak with a licensed lender, such as Strategic Mortgage, to fully qualify and explore all available options for your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC – AZBK#0909514 - NMLS#158804 - Equal Housing Lender
Vasilios Kamboukos – NMLS#160440
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