- Home -

- Forum -

How to Save a Bundle on Your Mortgage Payments (continued) by Neil Shelton

 #1 Switch to Bi-weekly Payments  Saves 815 days and $1,412

How it’s done:  Instead of making the regular monthly payments according to the amortization schedule, you make half a payment every two weeks.

What it costs:  Making half a payment twice per month doesn’t in itself cost anything and will save you $188 or so over the fifteen-year term.  What we're doing, however is paying every 14 days so that, because there are enough weeks in the year to make up thirteen months, you actually pay one month's payment per year more than you’re scheduled to.

The Results:  Paying every fourteen days, you pay your loan off 2-1/4 years early and you save $1,412.35 in interest fees.

Hint: You might also want to consider that you'll be making 180 more payments which might incur other costs, like postage or credit card fees..

#2 Make a Payment Every Three Weeks.  Saves 2,551 days and $4,199

How it’s done:  Instead of making the regular monthly payments according to the amortization schedule, you pay the monthly amount every 21 days.  It feels like a monthly payment, but you're speeding your payback considerably.

What it costs:  You make 5-1/3 more payments ($541) in a year’s time than you would paying the regular monthly amortization. 

 The Results:  Paying every three weeks, you pay your loan off seven years early and you save $4,198.96.

#3 Double Up on Your Principal Payments   Saves 2,709 days and $4,087

How it’s done:  Print out an amortization schedule for your loan. Each time you make a payment for the current month, include next month's principal amount in the check as well.  Then cross both months off the list.  Each time you do this, you save yourself a month over the amortization schedule.

What it costs:  At first, your payments are only a bit higher than the regular amortization, in the case given, the first month’s payment goes from $101.50 to $127.95 whereas your last few payment before your early pay-off are nearly twice what the original monthly payment was.

The Results:  Paying double principal payments, you pay your loan in half the time (7-1/2 years) and  you save $4,087.17.

 It's important to remember when making advance payments, that even if you're paid a year ahead, you're still obligated to make the monthly payments.

Previous Page                    Homestead.org home