Thank you to John Murphy, our V.P. of Mortgages, for being our guest blogger today!
Mortgage payments are due on the 1st of every month , right? And after 360 regular monthly payments, or 30 years, you get the deed to your home with no mortgage payments! Did you know there is an easy and no-cost way to cut your 30 year term down to 25 years or less?
Several companies offer a service to homeowners called the “bi-weekly” payment plan. The way this plan works is it allows you to pay your mortgage every two weeks, half the payment each time. This results in 26 payments being made or 13 full payments vs. 12 payments on a standard once-a month plan.
Sounds great, right? So what’s the problem? Most banks and credit unions accept only a full payment due on the 1st of each month and do not accept partial payments. Several companies offer this service to homeowners and will try to solicit your participation…the problem is there are high fees associated with the plans which remove most of the financial benefit! Consumers Credit Union does NOT endorse or recommend these services.
You can duplicate the benefit of bi-weekly payments easily by simply adding to your regular payment 1/12th of your regular monthly payment. This means if your regularly scheduled payment is $1,200.00, just add $100.00 (1/12th)! Consumers will automatically apply the extra amount directly to your outstanding principal balance…at no charge to you!
By doing it this way, there are no fees but all the benefit of paying your mortgage down more quickly! Over time you will reduce your loan term from 30 years to approximately 25 years, saving you money in interest and getting you “free and clear” 5 years earlier..all for free!