Submitted by throwinggushers t3_10q8sq2 in personalfinance
Hi everyone, I saw something online that said if you have a 30 year mortgage and make a half a payment every 2 weeks, rather than a full payment every month, you could pay off your mortgage about 10 years earlier. Is this true? I can’t figure out that math.
It's not just an additional payment, it all goes toward principle. Your normal mortgage payment is predominantly interest, especially early on.
It only goes toward principal if you call and confirm the process for applying payments to principal with your mortgage servicer.
Simply making an extra payment is not a guarantee of paying down principal. Loan verbiage and loan servicer practices vary greatly across the country.
You're right, I do have to specify.
Just pointing that out because my folks paid in for a decade and all of it went towards prepaying their payments, none of it counted any extra toward their principal.
No disrespect.
Yeah, its not different than making an additional principal payment
It's no different than making 1 extra full month mortgage payment per year.
If you pay once a month, you make 12 full payments. If you pay every two weeks, you make 13 full payments. This "extra" payment annually will help pay off the mortgage faster.
Closer to 5 years earlier at current interest rates, give or take.
There are 12 months in a year. But there are 52 weeks in a year. So if you pay every two weeks, you make 26 payments, which is the equivalent of 13 months worth of mortgage payments every year. That’s why you pay off early.
With mortgage companies nowadays, it works only if they agree. You are far better off with saving up money then once or twice a year making an extra principal payment toward your balance. Once you do this, ask them to re-amortize your loan. Some companies will do this automatically, some don’t.
Yes, if you target it 100% to principle. It's a damn fine move if you can do it without making other sacrifices.
Are you asking about specifically eactly every two weeks, or did you really mean "twice a month" or "every fifteen days which is about two weeks"?
If you just mean making half the payment twice as often - you are saving a little bit in interest. You know what would save you a little bit MORE in interest? Make your ENTIRE monthly payment half a month early. But in the grand scheme - that is not going to shave off ten years. Making an extra payment (especially EARLY in a 30-year mortgage) will have a bigger impact.
Timing of payments doesn't make a difference with U.S. mortgages because interest is calculated based on the final monthly balance.
if it's actually 2 weeks you're paying 26 times a year. If it's the 15th and the 1st then it's 24.
One is more every year.
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Yes, if you are doing the "bi-saver" plan which applies directly to the principle.
It can cut 7-8 years off a 30 year mortgage.
Werewolfdad t1_j6oizxe wrote
Yes but only because you make an additional payment per year, since there are 52 weeks in a year (52/4=13 payments instead of 12)