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Oh, there is a benefit with the interest being paid sooner, that is what the set up fee is. It's primary purpose is for the faster payoff, this is not a payment management program to accommodate bi-weekly payroll. (Maybe that is why some are getting it for free, they may not be getting the accelerated amortization). The question is: is it worth an additional set up fee? Once you know where your loan has landed, see if they can give you an approximate end date if you were to go with the bi-weekly plan (and make sure it's more than just a payroll collection plan). Then, hop online and run one of the many pre-payment calculators with one extra payment per year and see if it's worth any set up fee. (The last time I ran a comparison, the bi-weekly paid off 8 months sooner).
Oh, there is a benefit with the interest being paid sooner, that is what the set up fee is. It's primary purpose is for the faster payoff, this is not a payment management program to accommodate bi-weekly payroll. (Maybe that is why some are getting it for free, they may not be getting the accelerated amortization). The question is: is it worth an additional set up fee? Once you know where your loan has landed, see if they can give you an approximate end date if you were to go with the bi-weekly plan (and make sure it's more than just a payroll collection plan). Then, hop online and run one of the many pre-payment calculators with one extra payment per year and see if it's worth any set up fee. (The last time I ran a comparison, the bi-weekly paid off 8 months sooner).
Wow, that is very interesting. See that just tickles me pink to think that I am basically paying the same amount monthly but because I pay 1/2 the amount 2 weeks sooner, that I can actually pay off the loan and therefore save money by 8 months. Incredible! I hope my new mortgage company will go along with this. And thanks for differentiating between payroll collection program and an actual bi-weekly payment plan. Along with making 1 extra payment annually and biweekly payment, I can possibly pay off my house years sooner.
if you pay monthly $1000. your total for the year is 12,000
if you pay biweekly $500. your total ends up being 13,000
since your mortgage is 1000 per monththe extra $1000 is principle. but instead of paying biweekly and accruing extra service charges, you just add extra money on your monthly payment. the extra is used towards principle thus saving you the service charges, while still paying off your mortgage ahead of time and paying less interest.
i don't know your mortgage so, for a mortgage of $1000 per month you would just take the extra $1000 divide by 12 and get the extra you should add on each months payment. for a mortgage of $1000 you should add an extra $83 and some change. thus your new mortgage payment being $1083 and change.
Our mortgage is due on the first. Hubby's disability comes in on the first, so when the mortgage was new, when we paid on say January 1st, it was the payment due on February 1st. Instead of putting extra on each statement, we saved it and finally made an actual extra payment. So now when we paid on January 1st, it was the statement due on March 1st. I'm close to having another extra payment saved so will be 2 almost 3 payments ahead. Yes by paying extra on the principal it helps shorten the length of the loan, but in this economy I'd like to have that extra cushion of a couple months mortgage payments before worrying about shortening our 30 year loan by a few years. We've been discussing if we want to get 3 months ahead or not. But the money budgeted for our mortgage will be put on the mortgage be it saved until another whole payment can be made or put towards the principal each month.
if you pay monthly $1000. your total for the year is 12,000
if you pay biweekly $500. your total ends up being 13,000
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That's pretty much what it boils down to. If you went that route, you would be better off just paying the extra payment ($1000) in the beginning of the year. You'll still end up paying $13000, but it will be ammortized from day one in January, instead of 1/12th or 1/26 at a time. IF you wanted to pay $13000, then January 1 would be your best bet to pay the extra $1000.
I used to pay an extra $500/month towards my principal, until I found out I could pay $6000 in January and it would knock off 6 months or so MORE than the $500/month would. So, every January I pay $6000 towards the principal and just pay the normal mortgage the rest of the year. Same amount of money, just paid earlier.
Well, now I changed it to $1000. My mortgage will be paid off in 7 years. woohoo. lol It's addictive.
That's pretty much what it boils down to. If you went that route, you would be better off just paying the extra payment ($1000) in the beginning of the year. You'll still end up paying $13000, but it will be ammortized from day one in January, instead of 1/12th or 1/26 at a time. IF you wanted to pay $13000, then January 1 would be your best bet to pay the extra $1000.
I used to pay an extra $500/month towards my principal, until I found out I could pay $6000 in January and it would knock off 6 months or so MORE than the $500/month would. So, every January I pay $6000 towards the principal and just pay the normal mortgage the rest of the year. Same amount of money, just paid earlier.
Well, now I changed it to $1000. My mortgage will be paid off in 7 years. woohoo. lol It's addictive.
This is what I was talking about. according renter... it should not matter if you pay the money up front or if you pay a little at the time. $1000 equal $1000 no matter how you slice. However you mentioned the amount ammortized from day one. My question pertains to this issue.
I have seen a calculator before that showed how much faster you would pay off the mortgage by SIMPLY making biweekly payments. It was my impression that the FACT THAT YOU ARE PAYING THE MORTGAGE 2 WEEKS FASTER that the amount ammortized would be less and therefore you would pay less due to the interest calculator.
Also, my impression seems to be verified by some who state I should run the numbers and see if the savings would be worth the fee to set it up. So, there is SOME savings.
I do not understand a lot of mortgages... since I am not a PROFESSIONAL in the field. However, some people make it even MORE CONFUSING by misinformation.
Please read the below quote about biweekly payments. Thank Smartmoney for good information!
Quote:
Originally Posted by SmartMoney
Oh, there is a benefit with the interest being paid sooner, that is what the set up fee is. It's primary purpose is for the faster payoff, this is not a payment management program to accommodate bi-weekly payroll. (Maybe that is why some are getting it for free, they may not be getting the accelerated amortization). The question is: is it worth an additional set up fee? Once you know where your loan has landed, see if they can give you an approximate end date if you were to go with the bi-weekly plan (and make sure it's more than just a payroll collection plan). Then, hop online and run one of the many pre-payment calculators with one extra payment per year and see if it's worth any set up fee. (The last time I ran a comparison, the bi-weekly paid off 8 months sooner).
the FACT THAT YOU ARE PAYING THE MORTGAGE 2 WEEKS FASTER that the amount ammortized would be less and therefore you would pay less due to the interest calculator.
:
I'm not sure how it works either. You need to contact the mortgage company like mentioned before, for details on when they actually put your money to work. It could be the day of payment, or at the end of the due date, which is the end of the month.
BUT... paying biweekly isn't necessarily paying two weeks early. The idea of biweekly payments is getting the extra payment in there which would make it 13 payments/year, which would make it an extra principal payment on your loan. This is the reason I said to pay it on day one (Jan 1) if you can, and if you want the best bang for the buck.
it should not matter if you pay the money up front or if you pay a little at the time. $1000 equal $1000 no matter how you slice. :
Actually, it does matter when you pay the money. That is my whole point. If someone pays $1000 extra principal on day one of their mortgage, it is different than someone paying that same $1000 on day xxxx 5 years into their loan. The earlier the payment, the shorter your loan will become.
If the mortgage company credits your biweekly payment on the day you recieve it, then that's great, but that is not the real cost saver of your mortgage. It is the 13th payment you would be making that is saving your money on the loan.
Karl's Mortgage Calculator <---This calculator is the best I've seen so far. I love it. Get to know it and I'm sure you'll agree. I don't know if it does biweekly payments or not, but I'm sure it will help with understanding more about prepayments.
Plugged my numbers in, said I'd pay my house off in 8.7 years instead of 30 years. I think something is wrong with the calculations.
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more rep point to you!
