- This topic is empty.
-
AuthorPosts
-
Bill
When it comes to paying off a mortgage, homeowners often consider different strategies to reduce the interest paid over the life of the loan and shorten the repayment period.
Two common approaches are making bi-weekly payments or making one annual principal payment.
Bi-weekly payments involve paying half of the monthly mortgage amount every two weeks, resulting in 26 half-payments (or 13 full payments) each year.
This can potentially reduce the loan’s principal faster and decrease the total interest paid.
What is the better option for mortgage payments
-make bi weekly payments
Or
-make one payment during the year and put that towards the principle?SteveThere are a ton of mortgage calculators out there, so you can try both and a combination and see what works.
The biweekly savings plan usually saves you over 9 years and 19% doing nothing.
Combined, you can do a lot of damage to the amount of future income you don’t need to make.
DamianWhen deciding between making bi-weekly mortgage payments or making one additional payment per year toward the principal, both options have their benefits.
Here’s a comparison to help you determine which might be better for your situation:
### Bi-Weekly Payments
1. **How It Works**:
You make half of your monthly mortgage payment every two weeks.
Because there are 52 weeks in a year, this results in 26 half-payments, equivalent to 13 full monthly payments per year.
2. **Benefits**:
– **Interest Savings**: By paying more frequently, you reduce the principal balance faster, leading to interest savings over the life of the loan.
– **Faster Payoff**: You effectively make one extra monthly payment each year, which can shorten the loan term by several years.
– **Budgeting**:
Smaller, more frequent payments may be easier to manage and budget for some people.
3. **Considerations**:
Some lenders may not offer a true bi-weekly payment plan or might charge fees for setting it up.
Ensure your lender processes payments bi-weekly rather than holding them until the end of the month.
### One Extra Annual Payment
1. **How It Works**: You make your regular monthly payments and then make an additional lump-sum payment toward the principal once per year.
2. **Benefits** The additional lump-sum payment directly reduces the principal balance, leading to interest savings over the life of the loan.
3. **Considerations**: Requires discipline to save for and make the extra payment each year.
.
### Final DecisionIf you are disciplined and can handle making regular, smaller payments, bi-weekly payments might be better for gradually reducing your principal and saving on interest.
If you prefer the flexibility of making one lump-sum payment and can manage your finances to save up for it, making an extra annual payment might suit you better.
Both strategies are effective; choose the one that aligns best with your financial habits and preferences.
TomMake it on time, but not a day early if your mortgage rate is less than 5%.
ScottInterest accrues daily. So, the sooner you make extra principle payments the better.
JuleThe sooner the extra money gets applied to the principal, the less interest you pay.
BenIn terms of paying down a mortgage faster? Whichever puts more money in soone
-
AuthorPosts
Related Topics:
- Tax implications of paying off mortgage faster with extra principal payments?
- Under what circumstances would you consider paying down a mortgage with lump sums to accelerate time to home ownership or reduce monthly expenses?
- 73k student loan debt, $900/month payments, interest only? Refinance? PSLF?
- I took out a high interest loan, which (as always) was supposed to be short term but the payment killed me
- If I recast the mortgage but continue to make the same payment would it speed the repayment?
- What should be our next step to reach FI: sell our current home or keep it?
No related posts.