Question on Biweekly Payments

Quote from sdbk : Okay so i am a recent homeowner. Just did refi on my loan for 30 years at 3.375. I just got a letter from Nationwide Biweekly Administration saying if i change the administration of loan thru them for a Biweekly payment, it reduces my loan lifecycle from 30 years to 23 years. Not sure how it will work or how it will reduce. Also, what happens if i sell after 5 years. Do i own less on loan if i was making payments biweekly vs monthly? Anyone has any insights on this? Would love feedback from community.

Keep the monthly. Pay extra 1/12th of payment each month to principle and it accomplishes the same. Gives you flexibility and some places charge a fee for the biweekly payment.

Run the numbers yourself. Lots of calculators out there.

http://www.mortgage-x.com/calcula...ulator.asp

Paying to principle, in any way, decreases your loan balance.

You don't need to pay someone to do this.

It's a ripoff

This explains it better.

http://mortgage-x.com/library/biweekly.asp

Quote from saladdin : Keep the monthly. Pay extra 1/12th of payment each month to principle and it accomplishes the same. Gives you flexibility and some places charge a fee for the biweekly payment. Run the numbers yourself. Lots of calculators out there. http://www.mortgage-x.com/calcula...ulator.asp Paying to principle, in any way, decreases your loan balance.

Oh i see. I didn't realize it was biweekly and not twice a month .

First, at 3.375%, don't rush to pay your mortgage off.

Second, vaultaddict is right - these programs are a ripoff.

You can actually do better than what they're offering, all for free by simply doing what saladdin said and pay an additional 1/12th of your monthly mortgage payment each month. However, you'll actually pay it off faster than if you had the company do it for you because they don't forward your extra principle to the mortgage company each month. They wait until the end of the year and send in the additional principle as one additional monthly payment. So, instead of letting them make money off of your money all year and only making one additional payment for you per year, you would be making 12 additional payments, thus bringing your balance down much quicker.

Quote from Brian1 : First, at 3.375%, don't rush to pay your mortgage off. Second, vaultaddict is right - these programs are a ripoff. You can actually do better than what they're offering, all for free by simply doing what saladdin said and pay an additional 1/12th of your monthly mortgage payment each month. However, you'll actually pay it off faster than if you had the company do it for you because they don't forward your extra principle to the mortgage company each month. They wait until the end of the year and send in the additional principle as one additional monthly payment. So, instead of letting them make money off of your money all year and only making one additional payment for you per year, you would be making 12 additional payments, thus bringing your balance down much quicker.

Yes, i see the point. Seems completely useless unless you are prone to spending your money if it remains with you. Not my type...

Thanks

When you pay 1/12th of the mortgage each month, and add it to the principal, are you guys dividing up your principal + interest payment only by 12 or are you taking your payment which includes property taxes and hazard insurance and dividing that by 12? Thanks.

Quote from xxxsdesdexxx : When you pay 1/12th of the mortgage each month, and add it to the principal, are you guys dividing up your principal + interest payment only by 12 or are you taking your payment which includes property taxes and hazard insurance and dividing that by 12? Thanks.

Typically, the 1/12th recommendation refers to 1/12th of the principal and interest. However, there is absolute amount you must send in. You can send in and amount equal to 1/12th of your principal and interest only or 1/12th of your principal, interest, taxes, and insurance, or just a straight up $100 extra per month, or whatever you decide.

Quote from Brian1 : Typically, the 1/12th recommendation refers to 1/12th of the principal and interest. However, there is absolute amount you must send in. You can send in and amount equal to 1/12th of your principal and interest only or 1/12th of your principal, interest, taxes, and insurance, or just a straight up $100 extra per month, or whatever you decide.

My principal + interest only payment is $1,003.87. If I divide that by 12, I get $83.66. I went to Bankrate.com and used their mortgage calculator [bankrate.com] and show that if I made no extra payments towards the principal and interest - in effect just making the regular monthly payment -- I would be done January 17th, 2043. By paying an additional $83.66 towards the principal + interest I would be done on May 17th, 2039. That would take off 3 years and 8 months of payments or 44 months earlier.

Quote from xxxsdesdexxx : My principal + interest only payment is $1,003.87. If I divide that by 12, I get $83.66. I went to Bankrate.com and used their mortgage calculator [bankrate.com] and show that if I made no extra payments towards the principal and interest - in effect just making the regular monthly payment -- I would be done January 17th, 2043. By paying an additional $83.66 towards the principal + interest I would be done on May 17th, 2039. That would take off 3 years and 8 months of payments or 44 months earlier.

What is your interest rate?

You are making it more complicated, just pay an extra $100, $200, $300, etc a month towards the principal. You could also think of it as having a car payment, but if you actually do have a care payment this may spread you too thin. If your making more money on interest via other means above 3.75 put the money into those vehicles instead of the mortgage. If you making less on any of your money like in savings accounts then put it towards the mortgage.

Quote from Brian1 : What is your interest rate?

3.375% fixed for 30 years.

Quote from xxxsdesdexxx : 3.375% fixed for 30 years.

I wouldn't rush to pay that off.