Explore our blog for insights on buying, financing, remodeling, and taking care of your home.
There are several ways to pay off your mortgage faster and save on interest payments. Even better, not all methods require spending a lot of extra money! Take a look at the list below: Make extra principal payments. You can pay extra money toward your mortgage balance each month or make a larger, lump sum payment on your principal each year. This reduces the amount due on the mortgage as well as reducing the amount of interest that will accrue. Extra money can also be added to the principal payment from bonuses, gifts, savings and extra earnings. Just remember to make a note on the check for the money to go towards the principal! Make one extra mortgage payment per year. One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month, otherwise known as “bi-weekly payments.” With these payments, an extra payment is made so that the total number of payments that one makes adds up to 13 payments in a year rather than the 12 that would have been made with monthly payments. This adds up to significant interest savings over the duration of a mortgage. You also want to make sure that if your lender accepts this kind of payment they will not charge you a prepayment penalty. Also verify that the bi-weekly payments are being applied to the principal amount and not the interest. Otherwise, you won't notice the savings. Reduce your balance with a lump-sum payment. Have you inherited money, earned a bonus or commission, or sold a large item? You could apply that amount to your mortgage’s principal balance. Another option is any time you have a month where you have that third paycheck, apply that to the principal on your mortgage. This will happen twice a year, adding an extra principal payment to your mortgage loan. While paying down a large debt is nice, it's not a requirement. Consider making sure you have enough to work toward other financial goals, such as an emergency fund, before paying more on your mortgage. However, there are many options you can explore that best fit your budget. You can learn more about buying your first home with our Get Mortgage Ready Guide below.
Lace up your sneakers, you’re buying your first home!
Paying off your mortgage early is a great thing, and you can do it relatively easily and painlessly. You don't need to pay to join a service (sometimes a couple hundred dollars) then pay a continuing fee to have a third party company pay your mortgage payment. You can do this yourself. Bi-weekly mortgage payments work in a general sense, but the pay-services do not.
Making your monthly mortgage payment probably doesn't top your list of favorite activities but it's certainly a task you don't want to overlook. After all, your home is likely your largest financial investment and with each payment you make you're building equity in your home, which can be a powerful way to build wealth over your lifetime.
DISCLAIMER: This article addresses a question about general bi-weekly mortgage payment services. This does not reflect an opinion of any particular company/service. Comments below are not solicited; they are the opinions of readers weighing in on their own accord. We recently had a customer bring in a postcard he received that got his attention. It said, "You have a mortgage with Amerifirst Home Mortgage and we can help you pay it off early and save you thousands of dollars!" Our customer wanted to know if the bi-weekly mortgage service ad came from us at Amerifirst, because he was thinking about paying for it. We're busting this myth right now!