PSA- since there are alot of new home buyers

Just in case most people don't know this already

by making 1 extra mortgage payment a year or doing bi-weekly payments

you can save 7 years off a 30 year fixed mortgage

so if your payment is $2K a month- that's $168K worth of interest!

Re: PSA- since there are alot of new home buyers

WOW!!!

Good to know!

Thanks!

Re: PSA- since there are alot of new home buyers

Quite interesting! How does it work?

There MUST be ONE extra payment EVERY yea?. One year cannot be missed an extra payment, correct? If so, what are the consequences.

How do you go about getting this once a house is purchased? Tell your mortgage broker that this is what you want??

Thanks.

Re: PSA- since there are alot of new home buyers

I took our mortgage payment amount and divided it by 12 and that is the extra amount we pay each month. I told my mortgage company to take that extra $$$ and add it to the principle payment.

Re: PSA- since there are alot of new home buyers

Thanks for this info! Are there any other ways to shorten the length of the loan? if you make a few extra payments a year does that do anything?

ETA: You usually have to let your mtg co know that the extra $ should be applied to principle, right? Can you just write this on the check?

Message edited 1/31/2007 10:17:12 AM.

Re: PSA- since there are alot of new home buyers

good to know!

Re: PSA- since there are alot of new home buyers

Re: PSA- since there are alot of new home buyers

QUOTE]

yes - send a check that says principal payment only

and to answer a previous question - its not something you have to set up at your bank - and you shouldnt set it up - as long as you dont have a prepayment penalty, you can send in extra payments whenever you want - you can send in an extra $100 a month if you want to -




but you can set it up with the bank- I know my Dad did with Teacher's federal Credit union a few years ago

and I know that Jake can set it

they have bi-weekly programs b/c most people get paid every 2 weeks- and have 2 months out of the year with an extra check

Re: PSA- since there are alot of new home buyers

Re: PSA- since there are alot of new home buyers

Good advice Beth

We are doing something similar. We don't have anything set up, we just send in X amount more with each monthly payment and check off the box that says "apply to principal". We don't even tell each other it's an option, we now just think of our new amount as the payment.

The savings really does add up!

Re: PSA- since there are alot of new home buyers

....I LOVE this!!!

Re: PSA- since there are alot of new home buyers

the other great thing about this is that you build equity faster.

Re: PSA- since there are alot of new home buyers

Is it better to send 1 extra payment a year (say a $2000 check) OR add the extra amount to each check to equal the extra payment for the year? Or doesn it not matter

Re: PSA- since there are alot of new home buyers

We're planning on doing this also. It really is a smart idea!

Re: PSA- since there are alot of new home buyers

just remember that if you have your mortgage payment automatically taken from you checking account- ALWAYS DOUBLE CHECK

if something happens and they bank pays it late- it's still your fault

I am anal about this stuff- by Jake see's it happen to people all the time- just double check!

Re: PSA- since there are alot of new home buyers

Thanks for reminding me about this!!

Re: PSA- since there are alot of new home buyers

Also, make your payment principal only. You do not want to pay extra interest.

we send one principal payment extra a year.

Re: PSA- since there are alot of new home buyers

AbnAmro has my mtge and they have been taking out 1/2 a payment every two weeks, holding it then paying the mtge.

Now they want to charge my about $3.00 for every transfer - $6.00 amonth. But reading this thread I just realized that yes they are paying one payment ahead but, thats not the amount going to prinicipal, its just a payment ahead.

My dh doesnt want to stop this now that they are charging us, I do.

Re: PSA- since there are alot of new home buyers

This is for alot of loans. I paid off my 5 year car loan and 20 year student loan in under 4 years by sending in extra payments (towards principle) whenever I could afford it.

Re: PSA- since there are alot of new home buyers

Posted by betty

Is it better to send 1 extra payment a year (say a $2000 check) OR add the extra amount to each check to equal the extra payment for the year? Or doesn it not matter

Re: PSA- since there are alot of new home buyers

We just round up to the next thousand each month. I would rather control what I give out, just in case one month I want to use the money for something else.


As for which is better - mathematically, it is best to send everything as soon as possible - since that reduces the principal right away and the rest of the year interest isn't building up on that part you paid - but it's not always realistic to send it all at once.

Re: PSA- since there are alot of new home buyers

Thanks for posting this! I do this now with my student loans and car loans. You don't always realize how sending just a little more each time can go a long way.

Re: PSA- since there are alot of new home buyers

you can do it with car loans also- we had set up our last mustang payment that way

we were going to save $7K in interest and pay it off almost 1 year early