How To Pay Your Mortgage and Save Thousands in Cash

Typically, mortgage repayment schedules are developed so consumers are making one monthly payments to satisfy their mortgage obligation. For homeowners, this means making twelve payments of the same amount each year throughout the life of your mortgage loan. This method is great for consumers who can easily budget their monthly mortgage payment and find that there are no surprises. However, while paying in this structured manner will allow you to meet your financial obligations towards your mortgage, making one simple change to the way you pay your mortgage can save you thousands.

Make the Bi-Weekly Switch
By changing from making one lump sum payment a month to a biweekly payment system, you could literally cut years off of the length of your mortgage. The reasoning is simple: there are 52 weeks in each year. By paying biweekly, you increase your 12 payments a year to 26, meaning you will end up making two extra payments in a year which is equal to one full monthly payment extra. The best part of this plan is that the overage you have paid in the course of a year will be applied directly to your principal, meaning your will pay less in interest because you will pay off your loan faster.

How To Begin
Before considering this biweekly method and certainly before altering your payments to your mortgage company, be sure to speak to your lender about your plan and if the lender will even accept such payments. Most will but some will not. Those that do will need to be asked specific follow up questions such as whether or not the overage will be applied directly to the principal as well as if the lender will apply each payment separately upon receipt or will they wait till both payments have come in before crediting your account. If they credit in one lump sum, making biweekly payments will then have no savings benefits. You also want to ensure that if your lender does accept biweekly payments that will go directly to the principal on the mortgage that the lender will not penalize you for paying off the loan early, which some lenders will do. Provided you are reaping benefits of the biweekly payment plan, you can decide if the plan will work for your own financial situation before making the switch. Also, you must be cautious of agencies that are promoting a service or program that claim to assist you with making biweekly mortgage payments. These companies will advertise they can do the conversion work for you for a fee. However, the services are completely bogus and there is nothing in the process that can not be done by the borrower themselves. Avoid any ad or agency that is offering such services as they will only run away with your money and not worry about fulfilling their promises or your financial obligations.