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Bi-Monthly Mortgage Payments |
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Making bi-monthly Mortgage-Payments .... Good idea, or bad .... ?? |
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First of all, I doubt if you're really thinking of "bi-monthly." That would mean "every two months." More likely, what you've been offered is a bi-weekly payment plan, half a regular payment every two weeks.
Nothing wrong with the plan if you'd like to send in extra money and pay down your mortgage more quickly. But if you're thinking of "half a payment twice a month" -- think again. If you pay every two weeks, there are several times a year when you'd make three half-payments, on, for example, the 1st, the 15th and the 29th. It works out to 26 half-payments a year, the equivalent of 13 regular monthly payments. It's that extra money that works the magic.
You can achieve the same result (cutting seven or eight years off a 30-year fixed-rate loan) by sending in one extra monthly payment a year, on a separate check clearly marked "to be applied entirely to principal."
You could even throw in the money you didn't spend joining the bi-weekly plan and paying any service charges. But if money burns a hole in your pocket and you'd like a bit of enforced savings, no harm in signing up for a plan. |
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Edith
Originally published on August 11, 2008 |
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