How to save thousands in interest payments on your home mortgage!
By Sameer S Panjwani
you have a mortgage on your home or planning to get one? Here’s
something to consider if you want to reduce your interest payment
and save on thousands of dollars. Consider going in for a bi-weekly
mortgage payment plan.
what is a bi-weekly mortgage payment plan? The difference in this
type of mortgage plan lies in the frequency of payments. Out here
you make your payments every two weeks instead of every month.
By going in with such a payment plan, you end up paying for the
52 weeks in a year, i.e. 1 month more than the otherwise 12 payments
you would make with the monthly plan (52 / 4 = 13 payments in
a year). You may think why pay extra? But the benefits are there
for all to see. By going in for such a mortgage plan, you are
reducing the tenure of your loan as well as continuously reducing
the principal and interest which has to be repaid.
illustration to show what we mean - Suppose you were to go in
for a mortgage of $150,000 for a term of 360 months at an interest
rate of 6%, your monthly payment would work out to $899.93 and
your total interest through out the tenure of the loan would work
out to $173,757. Now consider the same mortgage taken on a bi-weekly
payment plan. Your bi-weekly payments would be of $449.67 while
your total interest for the entire tenure would work out to only
$135,294 + you end up completing the loan in 24 years instead
of 30. Huge difference!
savings from such a payment plan are huge and are worth considering
if you can afford to make the payments every two weeks. At least,
keep it as an option!