Paying on Mortgage early

[adubya]

I pay an extra monthly payment per year as some advice indicates here. But I also pay early. My mortgage payment is due on the first of the month, but I pay it on the 15th of the month prior. Won't that too lessen the interest, thereby reducing the length of the loan? Please advise if I'm just wasting my time.

[Fern]

Why not call your bank and ask, to be sure?

[obi_positive]

Depends on your lender and the terms. Some mortgage companies won't process your payment until the first of the month no matter how early they get it. Extra payments are good, perhaps you could add even more principal instead of paying two weeks early.

Or say you'd like to finish paying off your loan in 9 years, use a financial calculator to tell you what payments you should be making at your interest rate to achieve that goal.

[PennyPincher]

My gut tells me that it won't help to pay two weeks early. I think adding principal to payments is the way to go.

Many companies offer the bi-weekly payments, but they CHARGE you for that. So...I would tend to think that paying early will not necessarily increase your principal payments. I believe the prinicpal payment for a given month is set, regardless of what day you pay it.

I would call to check too. Otherwise, you might as well earn extra interest on the money by keeping it in your ING or savings account an extra two weeks! Even $1,000 at 3% earns $2.50 per month, or $1.25 every two weeks. So...if your mortage company isn't giving you any credit for it, at least get something from the bank!

[singinjeannie]

I've often wondered this myself. If I pay half my payment on the 15th and half on the 30th, should I save some money, seeing as I won't pay the interest on that first half for those 15 days?

I'm not a math wiz. My payment is $935 a month, so I pay $450 on the 15th and $485 on the 30th. at 5.25% interest, how much am I saving on the interest on that $450 in those 15 days?

Anyone???

[terry1156]

Paying early on your mortgage will have a very small effect if any at all. Many banks will only credit the money once a month no matter how many payments you make. If they do credit it when you pay, you still won't be saving that much money. For example. if you pay $450 early on the 15th and your rate is 6%, that would lead to $1.12 in savings. You'd be much better off putting an extra payment of $5 a month toward the pricipal.

Many banks charge to set up bi-weekly plans, but most also allow you to pay more toward pricincipal each month on your own with no penalty.

[Tree0164]

Many banks will not allow you to split the payment in half unless you set up an automatic withdrawal with them for a fee. If you want to pay off your mortgage early. Set up a dollar amount that you want to prepay and add that on.