Click the play button on the video window to the see the storyIt sounds too good to be true, but it is possible to shave years off of your 30-year mortgage without raising your monthly payments.
You simply have to know when to pay.
Jim Valenzuela lives in central Phoenix. He pays his mortgage using what's called a bi-weekly mortgage payment.
He took his 30-year fixed mortgage and turned it into 22-year fixed mortgage at absolutely no cost
Instead of making one payment each month, he pays half of his mortgage every other week. How does that save money?
Steve Miksta from Sterling Mortgage says it's simple. Essentially you are making an extra, hidden mortgage payment every year. We ran some numbers on our mortgage calculator.
Take a $200,000 conventional mortgage with a 5.5 percent interest rate. Your monthly payment with interest and principal would be $1,135.58.
But pay it bi-weekly and you'll make 26 payments of $569.79. That totals $14,814.54 over one year.
If you make the typical monthly payment of $1135.58 each month, that would only come to $13,626.96 in mortgage payments in a calendar year.
Essentially, you are tricking yourself into making an additional payment a year without actually writing a check to make that extra payment.
Miksta says not everyone should try to pay off their home.
He says if you are someone who is looking to pay down your mortgage and wants to be debt free and is planning on staying in there house for a long time, and your in a good 30 year loan, then go and make that extra principal payment.
The bottom line by doing a bi-weekly payment of your mortgage is that you are paying down the interest on your loan faster. If you choose this method, make sure your mortgage company applies that money to the principal.
Again, this option may not be for everyone so check with your mortgage company before doing anything.
If you want to find out how quickly you can pay off your home check out our
mortgage calculators.
