Went to bi-weekly on mortgage

[corn18]

This seems like a good way to pay down the mortgage a bit faster so I signed up for this today. I also added $50 to each payment to go towards principal. That means I will be paying ~50% more towards principal each year ($8,700 increased to $12,800). That gets me down to a 22 year mortgage vs. 30 year. I'll leave it there for now as I get my other funds built up.

This made me smile so I thought I would share.

Tom

[greenskeeper]

yep even a little goes along way when you are doing 360 payments. Enjoy the interest savings!

[porkpistol]

This seems like a good way to pay down the mortgage a bit faster so I signed up for this today. I also added $50 to each payment to go towards principal. That means I will be paying ~50% more towards principal each year ($8,700 increased to $12,800). That gets me down to a 22 year mortgage vs. 30 year. I'll leave it there for now as I get my other funds built up.

This made me smile so I thought I would share.

Tom

Is this something you worked out with your mortgage company or are you just going to pay your mortgage bi weekly on your own accord?

[corn18]

Is this something you worked out with your mortgage company or are you just going to pay your mortgage bi weekly on your own accord?

It's an option with Wells Fargo for my automatic payments. They will do weekly, every two weeks or once a month. THe weekly and biweekly just get put in holding until the monthly payment is due, so it doesn't reduce your interest. It just makes an extra payment each year towards principle because there are 12 months but 52 weeks. Same way I get 26 paychecks a year not 24 because I am paid every two weeks, not twice a month. Actually, my pension is twice a month and my work pay is every two weeks.

Cornfused yet?

Tom

[TBH]

Do you pay a fee for the biweekly payments?

[humandraydel]

Just out of curiosity, what is your interest rate? I have 29 years left on a 3% mortgage and I can't bring myself to pay it off early.

[corn18]

3.75% on a 30 year mortgage. No real reason to pay it off early. Just another small bit of forced savings for me. I won't think about the extra money going in and won't be tempted to pull it out to spend it on a boat or convertible.

I move around a lot and expect to move after my youngest daughter graduates from high school in 2016. Prior to this, I was military so I moved on average every 2 years. Made some money on a few, lost some money on a few so where I sit now is break even. I bought in 2008. Not before the peak, but not at the bottom of the market, so I have spent most of the past 5 1/2 years upside down. Data indicate I have some equity now, so that makes me feel better. So whatever extra I put in for the next 2 years will hopefully come back as equity when I sell.

Tom

[disneysteve]

Do you pay a fee for the biweekly payments?

I was wondering that too. They often charge a fee for this service which is absolutely a rip off since you can do the exact same thing on your own for free.

[Petunia 100]

My mortgage is also with Wells Fargo. You can sign up for bi-weekly or weekly mortgage payments right on the website, and there is no fee of any kind.

[disneysteve]

My mortgage is also with Wells Fargo. You can sign up for bi-weekly or weekly mortgage payments right on the website, and there is no fee of any kind.

That's great that they do it for free. Many other lenders charge for it which is a crock.

[dczech09]

3.75% on a 30 year mortgage. No real reason to pay it off early. Just another small bit of forced savings for me. I won't think about the extra money going in and won't be tempted to pull it out to spend it on a boat or convertible.

I am confused. "No real reason to pay it off early." So what is the purpose of the bi-weekly payment? I am just confused by what you meant here.

The only reason to do a bi-weekly payment is to pay it off early. Effectively, you are making 13 payments per year, as opposed to 12.

Example:
30 year mortgage
3.75% APR
$200,000 amount
$926.23 monthly payment

$926.23 / 2 = $463.12 (rounded up)

By paying $463.12 bi-weekly, you knock off about 4 years and save about $20,000 in interest. And this is simply pay splitting the monthly payment and paying bi-weekly.

You could also consider paying the mortgage as if it were a 15 year mortgage, or possibly refinance to a 15 year. Why? Pay it off faster! I am just confused by your comment about there being no need to pay it off faster. Why wouldn't you want to pay it off faster?! More savings, more money in your pocket, and less stress.

[corn18]

I am confused. "No real reason to pay it off early." So what is the purpose of the bi-weekly payment? I am just confused by what you meant here.

The only reason to do a bi-weekly payment is to pay it off early. Effectively, you are making 13 payments per year, as opposed to 12.

Example:
30 year mortgage
3.75% APR
$200,000 amount
$926.23 monthly payment

$926.23 / 2 = $463.12 (rounded up)

By paying $463.12 bi-weekly, you knock off about 4 years and save about $20,000 in interest. And this is simply pay splitting the monthly payment and paying bi-weekly.

You could also consider paying the mortgage as if it were a 15 year mortgage, or possibly refinance to a 15 year. Why? Pay it off faster! I am just confused by your comment about there being no need to pay it off faster. Why wouldn't you want to pay it off faster?! More savings, more money in your pocket, and less stress.

There is a very high probability that I will be moving in 2016 or 2017. So paying it off faster is not my primary goal of paying more each month. There's more to saving money than math. At least for me it's 40% math and 60% mental. Paying extra on the mortgage automatically makes me happy. It's not huge, but I like DisneySteve's advice that you don't have to be all in re: payoff all debt, vs save everything to EF vs. college fund vs. it never ends. I am going to try a balanced attack and see how that fits my brain housing group.

Tom

[snafu]

Once I really looked at how my payments were allocated Interest, Principal & taxes, I switched to bi weekly without feeling any change even though it meant one extra payment per year. Since you get a tax deduction from mortgage interest, you might consider transferring that sum directly to principal. We added a 'balloon' payment each year [no tax deduction here] and were shocked by the savings from interest. That factor plus modest increases in housing made our equity escalate faster than I could imagine. If you have expensive mortgage insurance, it can be eliminated. When our city offered TIPP [ Tax Instalment Payment Plan] I switched to paying property tax by automatic transfer. that's when I discovered I'd been paying a fee to the bank for that service and a penalty for property tax not paid in full by it's June deadline. Ultimately, we paid off our mortgage in 13 years which was a huge surprise. The savings in interest was enormous.

If you expect to sell in a few years, it's all about equity, the sum you walk away with.

[greenskeeper]

Just out of curiosity, what is your interest rate? I have 29 years left on a 3% mortgage and I can't bring myself to pay it off early.

What is the balance on your mortgage?

Paying it off early even at 3% can save you thousands in interest AND have a PHYSICAL ASSET that you can live in.

I'm sure I'll hear "you can beat that return on the stock market" but that is not a guarantee now that the FED has screwed with the markets so much through quantitative easing (money printing)

Personally I'm on pace to pay off my 30 year in 12 years.

[corn18]

What is the balance on your mortgage?

Paying it off early even at 3% can save you thousands in interest AND have a PHYSICAL ASSET that you can live in.

I'm sure I'll hear "you can beat that return on the stock market" but that is not a guarantee now that the FED has screwed with the markets so much through quantitative easing (money printing)

Personally I'm on pace to pay off my 30 year in 12 years.

The real problem I have with my mortgage is that I am paying $2100 in P+I and $1,250 of that is interest, so while overall the APR might be 3.75% over the life of the loan, right now it's higher than a payday loan. For folks like me that have never paid longer than 5 years on a loan, I am getting killed. Not sure how I get out of this other than paying cash for a house.