Click the play button on the video window to the right to see the storyMost of us make one mortgage payment a month. Well, some businesses claim you save thousands if you pay half your mortgage every two weeks and they want to charge you to do it.
Richard in Phoenix sent me an e-mail saying a company offered a bi-weekly mortgage payment plan and he though it sounded fishy.
Bi-weekly payments do save you thousands of dollars in interest over the long haul.
If you go to
Bankrate.com and use their bi-weekly calculator you can see how much.
Let's say you have a $200,000 mortgage at 6 percent interest for 30 years. Your monthly payment is $1,199 with more than $600 of it interest.
Bi-weekly you'd pay half which is $599.55. But the interest is just $230.68.
By year 10, the calculator shows you owe $17,000 less than paying the traditional mortgage payment.
And you would have the loan paid off by year 24, instead of 30 years the traditional way.
It's not as easy as just splitting your payment.
Most lenders won't allow it unless you sign up for a costly plan. And many online businesses want to charge you up to $500 to do it.
But there's a way to get similar results for free.
The big reason you save is that you make one extra mortgage payment a year.
So, divide your monthly payment by 12 and then add that amount to each of your 12 monthly payments.
That way you're paying more off your principal, there's less interest and you've made the extra payment .
If your lender allows free bi-weekly , go for it. If not, try the other method and save.
