Home mortgage - 10/6/12 | TigerDroppings.com
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ElleshooTGR
USA Fan
Red Stick
Member since Sep 2007
2786 posts

Home mortgage

I just recently bought my house and I am currently set up to make payments monthly. I've heard, in the past, that paying a payment bi-weekly is better and will cut 10 years off the mortgage. Is this true, or is there a better way to approach cutting the length of the mortgage? For example, adding a couple hundred dollars to the principle each month. I'm a newbie to all this stuff.


sec13rowBBseat28
LSU Fan
GIGGITY
Member since Aug 2006
9366 posts

re: Home mortgage
It has worked for us. Paying a couple of extra payments each year towards principal will take several years off also.


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Swoopin
Auburn Fan
Member since Jun 2011
17949 posts

re: Home mortgage
LINK

ETA: Look for the part that says

" Extra payments

Calculate the impact of extra payments using any combination of the inputs below."

Read more: Loan Calculator LINK
This post was edited on 10/6 at 6:57 am


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Lion4Life
LSU Fan
Louisiana
Member since Sep 2012
88 posts

re: Home mortgage
Yes, it is better to finance for the longest term possible and pay additional if it can be afforded. There are 52 weeks in a year so you would wind up making 26 bi-weekly payments which amounts to one extra monthly payment annually. Also, an advantage of financing the longest term is your payment ends up being less than a short term loan. If you lose a job then you aren't stuck paying the highest monthly payment as if you were locked into a 15 yr mortgage. Always pay extra if you can afford it.
This post was edited on 10/6 at 6:59 am


sec13rowBBseat28
LSU Fan
GIGGITY
Member since Aug 2006
9366 posts

re: Home mortgage
quote:

Always pay extra if you can afford it.
This cannot be said enough.


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nycajun
LSU Fan
Nothin' could be finer.....
Member since Dec 2004
17624 posts

re: Home mortgage
A 30 year mortgage is a 30 year mortgage. If you are able to arrange scheduled payments every 2 weeks you will not shorten the maturity (final payment) date. That amortization schedule will, however, accelerate the transition from interest to principal in each payment. (Payments are level, i.e., the same each payment period. Each payment consists of part interest and part principal. On a 30 year mortgage, almost all of the early payments are interest. As the little bits of principal slowly pile up, the part of each payment that is interest slowly gets smaller and the part that is principal slowly gets larger.)

The effect of prepaying principal is typically to shorten the maturity, and is not a bad idea. Though if you have a mortgage that carries a 3.8% interest rate and a credit card balance that carries an 18% interest rate, using the free cash flow to pay off your credit card is way smarter. If the more expensive (i.e. higher interest) debt is all paid off and there's still free cash flow, paying down principal is a good practice.
This post was edited on 10/6 at 7:06 am


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NaturalBeam
LSU Fan
Member since Sep 2007
13180 posts

re: Home mortgage
True but rates on a 15-year are almost free if you can afford it


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wickowick
LSU Fan
Head of Island
Member since Dec 2006
27265 posts
Online

re: Home mortgage
quote:

Always pay extra if you can afford it.


Rates are so low now and I believe inflation is coming. Prepay in that senario is not your best use of money...


Kev831
LSU Fan
Houston
Member since Nov 2010
60 posts

re: Home mortgage
Comfortably paying extra on your mortgage is always a good thing. If you just bought your house you may not have gotten used to paying your mortgage yet, so paying extra may seem like a more down the road thing. Doing bi-weekly payments makes you pay an extra payment every year with out you having to even think about it. It's nice since most people get paid every two weeks anyway. I do it weekly.

Another thing I do is when I run into extra money, like getting a raise, I always increase my mortgage payments. Even if it's only like $50 bucks or so. Simple stuff like this will knock years off a 30-year mortgage and may end up saving your tens of thousands in interest in the long run. Just depends on your mortgage structure.
This post was edited on 10/6 at 7:42 am


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fightin tigers
Downtown Prairieville
Member since Mar 2008
28782 posts
Online

re: Home mortgage
Think it is supposed to knock off 5 years on our 30 year.


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LSUOFFSHORE
LSU Fan
Madisonville,LA
Member since Nov 2007
220 posts

re: Home mortgage
If you choose to do it, which I highly recommend , do it on your own. Most mortgage companies offer it, but they don't advertise that they charge extra for it. What works for me is I automatically transfer x dollars weekly into my savings then pay the note from there. It has allowed me to budget much better and turn a 10 year mortgage to 6.


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