Unlocking the Complexity: How AI Legalese Decoder Can Help Analyze the Benefits of Making Two Monthly Mortgage Payments
- June 12, 2024
- Posted by: legaleseblogger
- Category: Related News
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Understanding the Strategy of Splitting Mortgage Payments
I have come across numerous social media posts advocating for making half of the house payment at the start of the month and the remaining portion two weeks later. The claim is that this method can potentially save around 8 years on the mortgage term and a significant amount of interest.
However, the concept seems a bit puzzling to me, and there are conflicting opinions on whether this strategy is still effective. I am looking for clarification on whether there are any actual benefits to this approach.
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The AI Legalese Decoder can provide a clear and concise explanation of the potential benefits of splitting mortgage payments. By analyzing and interpreting the legal and technical language associated with mortgage terms, the decoder can provide insights into whether this method is still viable and how it may impact the overall mortgage term and interest savings. This tool can help individuals make informed decisions regarding their mortgage payment strategy.
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The typical recommendation is biweekly (every 2 weeks) vs bimonthly (twice a month). This effectively results in 13 payments a year and helps pay down your debt faster.
I would make a payment 1st then add another to the principal…
What they are talking about is paying half every 2 weeks. The reason this helps is because there aren’t 4 weeks in a month, except February 75% of the time. So essentially you make 26 half payment instead of 12 full payments. So you’re paying the equivalent of one extra payment a year, thus paying down the mortgage quicker.
The reasoning goes:
1) 52 weeks in a year therefore 26 payments: that’s 13 month/year
2) slightly less interest paid since you save 2 weeks interest on outstanding balance being reduced early each month
The savings can be calculated easily with a spreadsheet
Not unless you setup plan with servicer. Otherwise they just hood the payment in I applied funds until u send in the whole thing so the interest benefits you’re trying to get don’t happen
IF you company allows it. check. many will not credit the princ. until paid in full and so you just lose money it should earn in a HYS
It’s beneficial as extra payments applied to the principal, which reduces the interest and the total amount paid over time, and yes shaves time off your mortgage.
Now whether it’s worth it to do so depends on a lot of factors, such as your mortgage balance, interest rate, income, goals, and what other uses for that money you might have.
You can easily plug your numbers in here to see how much you’d save
https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php
It 100% still works. 26 pay periods a year which means you’ll make 13 monthly payments in the same time you would have otherwise made 12.
Find a mortgage payment calculator spreadsheet online and play with the extra payments column to get a better visualization.
Just add extra to your payment (make sure your lender will apply it to the principal) if have the money, otherwise yeah can do every two weeks.
It will reduce the length of your mortgage and some interest, but interest is front loaded and you are paying very little interest in the last years of the loan.
I add enough that it is a payment and a half extra a year… Have refinanced a couple times and the last was a 15 year mortgage, will be payed off next year in 13 years, and 6 years early overall (original 30 year mortgage was until 2031)
As others said it’s biweekly not twice a month. So every 2 weeks = 26 payments a year, divided by 2 = 13 payments a year vs only 12 with the standard monthly payment.
It works because (1) you are paying down the principal slightly faster and (2) it aligns better with many people’s pay that is biweekly / 26 per year not monthly or twice a month so its easier for them to just budget for 26 payments instead of 12.
As others have mentioned, it’s effectively an extra payment a year. There are online mortgage calculators to show your savings based on whatever extra you pay. The easiest way is just keeping it monthly and adding the difference. Be sure to make sure it’s designated to go toward principal. This is a sneaky way of the mortgage companies to keep you from paying down your loan if you don’t tell them.
Firstly. Paying extra towards any debt will depend on the interest rate.
One possible reason this might not be the 2 week thing that results in more payments: if your mortgage accrues interest daily, paying half early would theoretically save you a small amount of interest that could add up over 30 years.
The problem is that mortgages generally accrue monthly, not daily, so this method is not likely to help you at all.
If your loan allows you to make principal payments, and your interest rate is more than you can get in a HYSA, it could be worth your while. If your loan just adds additional payments to your esdrow account, you’re losing money on it because this doesn’t deplete your principal balance, just depletes your bank account.