Paying Off Your Mortgage Early and Saving Money!
You can reduce your loan term and interest paid by making bi-weekly payments! Bi-weekly payments save money because a bi-weekly loan schedule pays 13 months of payments each year. This extra month adds up, knocking about 4 years off the life of a 30 year mortgage and saving thousands of dollars in interest.
Begin by ensuring that there are no pre-payment penalties, additional fees for bi-weekly payments, and learn when payments are applied. (Tip: Always seek loans that apply payments when the payments are made versus only once monthly.) If your bank is unfriendly to biweekly payments, another option is to divide your monthly payment by 12 and include this additional twelfth of a mortgage payment with your normal payment. Just ensure that the additional money is credited to your principal with that payment!
Is it worth it? While your mortgage is paid off early, could you invest that additional payment in something that has a better return than your mortgage? Paying off higher interest consumer debt that is not tax deductible (like mortgage interest) gives a much higher return, and even basic investments should do better than our current (September 21, 2015) mortgage rates. However, there is something to be said for a mortgage that is satisfied early!
Do you want to pay off your mortgage early or discuss a beneficial refinance? While I am not a mortgage broker, I can introduce you to some great ones! Please reach out to me and I’ll be happy to help!