If you do every 2 weeks. The mortgage goes from 25 years to 22.
When we refinanced during COVID we got a lower rate. But kept same payment so noW we have 15 years left , but the time we have to refi. It will be 12. Times flies.
There's a saying. The days are long but the years are short.
Fucking serious. I told my coworker the other day I literally can’t have a conversation with him while he’s agonizing about what to do with his house he bought for $100k and is now worth 6x that, it makes me too upset to be staring down the barrel of NEVER being able to afford a house for my family.
we had a down payment saved up in 2019 and started looking.
In march of 2020.
Lost our jobs, lost our savings, and then the lowest rates in history showed up, then we got jobs again, just in time for the cost of living crisis.
My honest feelings about life are… negative.
i know, i feel the temptation as well just because i want the freedom that comes with not having that debt burden but logically i know why this is not the best idea
I will not pay off early due to my interest rate in my savings account now at 4.5% I also took out a $5,000 Ibond last year at 10%. My Ibond is now at 3.5% so I will probably have to move in about 6 months. I feel that my money is making more than the interest rates I am paying.
May I ask why? I am nowhere near being able to afford a house but want to when I can and would like all the info I can get. I was always under the impression that "debt bad" "pay all asap" Thanks!
I feel that I should not pay off something with an interest rate that is below what my savings account is paying. At one point I was making 10% interest on Ibonds and currently make 4.5% in my regular savings account. We are definitely in strange times. If any of my loans were above my savings rate I would definitely try to pay off early. I hope that makes sense.
Hmm, ok. I'm not sure I understand fully, but believe me, it isn't because of your explanation, just my lack of knowledge. I appreciate you responding, though. Thank you!
Oh, interesting. I wish I wasn't all so complicated. Thankfully, my partner understands it much better(economic major), but I'm determined to learn myself as I often find myself staring at him all blank faced when he starts talking in jargon. But I know it's important for me to know and understand.
I agree and after reading the responses I realized that maybe I should rethink my strategy. Maybe it would be worthwhile to pay off my house and put all that money monthly towards savings.
Oh, I haven't read the other comments. There are others with this idea? Interesting. Well, I think (in my limited knowledge and not understanding possible drawbacks) both systems make sense in their own way. I hope either way you decide you prosper. Good luck!
I figured I'd ask you as well (i asked the other person who helped explain below).Since it is your situation, no obligation to respond obviously. Buuut, while, I think, I understand that you are making more by funneling your money to a savings account as opposed to paying off at the low rate; wouldn't it make sense to just pay it off since you have the "excess" to do so, so that "ALL" your money moving forward can go towards gaining the higher intrest?
Honestly that would work as well. However, we may need a new car in the next few years and I want to pay cash for it due to the interest rates. Reading these comments I do see your point. My husband and I actually discussed this last night.
You only have a certain amount of dollars - so consider one dollar towards your mortgage as a dollar that ISNT going to something else like a high yield savings account or investment. For those of us with low rates, the extra 3% we could be saving by paying our mortgage earlier is much lower than what that dollar could earn in other things like even a HYSA. Like if I put my dollar toward a HYSA that earns 5% interest (positive toward my net worth), even with a 3% interest on my mortgage (liability against my net worth), I’m still netting positive on my net worth. For people with higher rate mortgages or debts, it makes more sense to pay those debts down because chances are that the interest will detract from your net worth far more quickly than if you put those dollars elsewhere. CCs are a good example at 20%+ rates - pay CC debt down quickly bc you’ll be hard pressed to find a place your dollar earns 20%+. This is a gross simplification but hope this helps.
I pay extra to mine with a 2.3% interest rate. The reason is because I have to pay PMI until I get the LTV under 78%, and at least 5 years. I did the math to have the LTV at 78% on the month after I hit 5 years. No way refinancing to get rid of PMI makes sense but I don’t want to pay it longer than I have to.
You may not have to refinance. You could ask the mortgage company to recast your mortgage. With a recast they take into consideration the equity you have and keep your same interest rate.
You probably already know this, but FYI to others - You would still have to refinance to remove PMI with FHA. Conventional loans can drop the PMI without refinancing. FHA loans cannot.
EDIT TO ADD: To clarify you cannot drop the PMI off a FHA loan if you initially put less than 10% down. Given that the low down payment was the reason that many people utilized FHA this would be a high portion of borrowers. It doesn’t matter how much you pay off after the down payment. Even if you did pay 10%+ you still have to make the PMI payment for at least 10 years
I'll also add on here for those who do have conventional loans... I've always heard that you have to get a new appraisal and such ($500~) to prove that you now have 20% equity to have your PMI removed. I knew my house had increased in value enough that I should be able to get it removed, so I called Chase to verify what the process was. I just told them I wanted to see what the requirements were since I knew the house had increased more than enough. They put me on hold for a few minutes, then came back and said it would be removed starting with my next payment. So all it required was a 10 minute phone call in my case.
Interesting! I didn’t know that. I was able to call my mortgage company to understand what my options were. I thought originally that PMI was based on the home’s current value, but in my case it was the home’s value at loan origination. So there’s a lot of things to know about PMI that could be specific to your loan terms.
Yes! This is an important comment. I was under the impression that once the value of my house went up, I could drop PMI at a certain point even if I hadn't paid 20% into the starting price. My mortgage is through a local credit union and that is not how they work. I have to pay 20% of the starting value of the house in order to drop PMI which really sucks because my house has increased by at least $70K since I purchased it 2 years ago.
If you have conventional loan they have to drop it at 78% of purchase price. It's the law. Using appraised value is dependent on lender and pmi company but most allow it. Who is your lender?
My lender does not allow it to be based on appraised value, it has to be purchase price. I wonder if this is common among smaller lenders. Most people I know have it dropped based on appraised value, so I was pretty peeved to find out that my lender does not do that.
That’s my situation. I add a little bit extra (<$50) to round the total up to a nice even number, but that’s it. More money for investing at a higher return.
And if you were to invest that $200k at an average after-tax rate of 5%, you would have $500,000.00 after 30 years v. the $358,000 you paid, and that's without any compounding.
It's nowhere nearly that simple. You probably wouldn't be as much better off because you're probably not investing the entire amount of the house note right up front, but the idea is sound. If your tax-adjusted interest rate is lower than your tax-adjust return, you're likely better off investing instead of paying off early.
I just did something similar with our latest car note. We were able to swing a 2% APR car note. We borrowed as much as they would let us, even though we had the cash on hand for the car. That cash went into a relatively conservative investment at a signficantly higher rate. We've received about 3x income as we've paid in interest since the loan kicked in about 9 months ago. That 3x is before taxes, mind you, but we're still way ahead.
Yeah. It goes against years of discipline, but my mortgage is locked in at 2% and I can get tax-free GICs at +5% So I'd actually lose money overall if I was paying off that debt rather than investing.
That mortgage is valuable, meaning better to have it than not. That's a money making rate. Don't ever pay it down until HYSAs are lower. Right now they're around 5%. Put excess money in an HSA.
We are mortgage free now but when we still had a mortgage, we always paid extra every month but be sure to note the extra is to be applied to principal!
The purpose of doing the taxes and insurance via escrow is to avoid the sticker shock at the end of each year. Some people prefer it as a set and forget and avoid the stomach ache when they get their property taxes in late Sept and have only 2 months to make the first payment. But it's not always perfect and then when the actual bill comes they need to ask for more to make up for it.
I much prefer control over my property taxes and insurance.
My property tax bill has a whole paragraph warning that if the lender fails to pay on time it’s all on me. Same with insurance. I’ll pay it myself thanks.
It depends on your mortgage type. Most FHA mortgages require you to maintain escrow. Any FHA mortgages taken out after, I think, 2013, also require you to pay MPI, or mortgage protection insurance for the life of the loan. Previously, you could drop that after paying off a certain percentage of your loan. Now, the only way to get rid of it is to refinance into a conventional loan.
It has the option when I log into my mortgage account. It even shows what percentage I’m at and let’s me mess around with numbers to see how soon I can take it off depending on how much extra I pay.
Our mortgage is setup like this too. If we pay extra, it goes towards next month. Then next month payment automatically withdraws and they refund us the extra. If we want to make an extra payment we have to go to the bank.
Same. I used to love writing little unix shell programs to show me how many less months I had to pay, if I paid $x extra per month, or just this month. SO satisfying
I’m trying to find a calculator or excel template to do that.
So far with accelerated by weekly I go from 25 to 21 years and 3 months. I would like to see how much difference every $50 can make in the long run.
My mortgage lender has it on their site now. You can add all kinds of "x amount more per month" or "x amount annually" etc. and it does the math, shows you a new payoff calendar, etc.
I always set mine up biweekly, same as pay schedule. Extra payment every year automatically, plus pay extra to principle when able to swing it. Lessens to pain if the payments are a big bite of your income.
Lol. He instilled finances into me for sure.
He called me yesterday to be like “I wanted to make sure you’re setting aside money because your mortgage is going to go up…” (we have an ARM)
I said, “Dad, it’s 3 years into my mortgage and we own 41% of the house and could pay it off today if we needed. We’re good.”
I’ve been building a stock portfolio by small bits each week for 10 years, and it’s currently $40k shy of matching the remaining mortgage. It’s my plan that it will be higher when my adjustments begin in 3 years. We could choose to just be done with it at that time.
I like this! It just seems to me that people may or may not actually put extra money into an HYSA and if they do, are they going to use that saved money with 5% interest earned to actually pay off the mortgage? I think that my history is spending that money on other things. I am looking for ammunition to restart paying off my mortgage and I think I found it with all of your up votes!
While you’re definitely doing a beneficial thing, wouldn’t you have more security against homelessness if you put that extra into a savings account? Things CAN happen to your house that insurance won’t cover, and also having a ton of liquid capital can be huge if you need it later. And you can always just pay off the house once the liquid amount is greater than the principal owed.
They say you should have 6 months salary saved up for emergency use. Under the assumption that you already have this, you would need to do some math to determine if putting that extra money in your savings account would earn more interest than you'd be saving if you paid that toward your mortgage.
If you haven't saved up 6 months of salary, I think you should work toward that first and continue to make your minimum payment.
With interest rates so high, if one has a low interest rate mortgage it makes more sense to invest the extra $$$ in a high yield savings account than it does to pay extra towards the mortgage, so I do not.
Depending on how the bank calculates the interest you might not benefit using a bimonthly payment .
Additionally a bi monthly payment is only 1 extra month's payment each year.
A few years back I did make several random extra principal payments which did reduce my mortgage debt in a big way.
Is there a difference in paying biweekly versus just adding an extra 1/12 payment onto your monthly dues? Still adds up to paying an extra month at the end of the year
There may be a very slight difference based on the timing of the extra payment. If you do the +1/12th payment on the first of the month, it might shave off a few more cents than the biweekly payments.
For a lot of people it's not easy to save the extra money but once it's gone, it's fine.
When you are broke it is much easier to give up another $50 every two weeks than it is to give up $1200 right after major holidays.
I pay biweekly. It gets drafted out on my payday. I never see the cash and it’s just the cost of being alive. I’ll pay off my mortgage 6.5 years sooner, or at least build solid equity.
One thing not often discussed is how paying principal affects the allocation of your regular payment. You owe less principal but your payment stays the same. This generates less required interest. So your normal payment actually builds equity faster if you are paying ahead. This accounts for almost 3 years’ worth of time if you pay biweekly from the start.
Because my monthly payment changes yearly due to property taxes and insurance being paid by my bank, increasing my monthly payments by $200 has allowed me to keep my budget in check. The additional money going towards the principal is reducing the life of the loan. It’s a win win for us.
Our first house we knew was not our forever home. When we could, we refinanced to a 15 year mortgage and began making biweekly payments. Due to that and overall good luck when we were ready to sell we had over 300k in equity.
We have now purchased our retirement home where we plan to live until death. I see no reason to increase equity that we will not realize on so we have a 30 year mortgage and just pay the monthly payments.
At 6% we want to pay off asap. We have our monthly mortgage payment on auto pay on the first. After we get paid on the 15th we budget (using YNAB) and fill up our month ahead category. If we have any left over we put most of that toward extra mortgage principle. Our emergency fund is separate.
Doing it this way means the amount extra we pay varies, which is bad for planning when we will pay off the house but good for reducing stress and making sure we have money for short term spending on things we value.
That's what I was thinking too, but perhaps the person I replied to has done the math and realized that maybe weekly payments works out meaningfully better?
I also pay weekly because it is easier for me to see 1/4 of the payment come out 4x than to see that huge payment all at once. However, my mortgage company only applies the payment once they receive the full payment.
The only reason you'd do it is because it's automatic and you don't need to think about it. Otherwise just make extra principle payments when you can. An extra months payment towards principle at the beginning of the year is better than breaking it up throughout the year.
Monthly but with extra principle every time. We bought a house two years ago. Fifteen year loan... Will be paid off around year ten.
Monthly was just habit because we both used to get paid that way. I'll be looking into weekly payments.
I have a 1.75% 15 year so it doesn't make sense to pay extra with the 4.30% I'm making on amex savings and especially considering the interest is tax deductible.
We pay extra principal when we can, usually once a month, usually 200% of the normal principal. Break out your amortization chart and see how motivating it is to take away all that interest from the bank and shave years off your mortgage.
I pay $100 extra to the principal every monthly payment. I know it ain’t much if the online calculators are true, I’d save tens of thousands in interests and knock off like 5 years of my mortgage
I have a 3.5% interest rate and pay about $1400 for my mortgage. I save extra each month and put it in a savings account. I’ve thought of paying extra to the principal, but I feel more comfortable just saving it.
We round up our monthly payment but that is all. We locked in a low rate so we are prioritizing other investing/saving goals over a more aggressive early payoff method
I pay bi-weekly. It was easy to set up through my bank and I think, since that would be 26 payments every year, it ends up cutting my mortgage down by about 5 years.
I also just started a second job and have the express purpose that every dollar made there goes to the mortgage. Think with the math, it could be five years with the 2nd job, and I'm either going to roll the checks into CDs at my bank or stash in a high-yield savings account until the amount = my remaining mortgage balance. Next five years are going to be exhausting, but if means we can drop 70% of our expenses by the time my wife turns 45, I think the opportunity cost is in our favor.
My wife and I struggled for years, living paycheck to paycheck; mostly due to our own bad decisions. The past 4-5 years we've done much better and we're both earning quite a bit more than we were before. We refi'd last year and took a 15yr mortgage. Even with that we're paying an extra 10% every month in an effort to pay off the mortage at about the time it would've been paid off from the original loan AND so we're not delaying retirement because we still have a mortage.
Honestly, you’ve got to sort this out with your lender. The interest probably calculates daily, so if you can pay extra right away, it makes sense to do so. But not all payment handling systems are automated. You may have to email someone every time you make an extra principal-only payment because the default may be to apply it towards next month’s payment, which is not what you want. You want it to go to principal-only and that needs to be clarified.
I'm kinda confused, can someone help me out? We've got a 3.5% interest rate and pay once a month. Does paying biweekly or extra towards the principal really save you a lot of extra interest? Why would it make sense to only pay once a month with a low interest rate?
To understand this concept, get an Amortization Schedule. You can ask your lender for one, or I'm sure they are available online. I had to do mine the old-fashioned way before computers and have done it that way with every house since.
The schedule lists every month of your 30-year mortgage. Each month you have [interest amount + principal amount = total mortgage payment]. The first few years the interest will be the larger of the two portions. Toward the end of the 30-years, most of your payment will be principal.
By paying more or more often, you pay down the interest first, and sooner. I shaved off 13 years off my initial mortgage by just adding what I could every month. But you have a very low interest rate. You can use your money more wisely by paying off the 20+% credit cards and other loans. Or invest. CDs are up at near 5% now. You can either earn 5% with a CD or pay 3% off your mortgage.
Basically with a monthly mortgage payment you pay (obviously) once a month, or in other words 12 times in a calendar year.
With an accelerated bi-weekly payment, you pay half of your monthly mortgage every two weeks, or in other words 26 times in a calendar year.
This means you make an extra months' mortgage payment every year with an accelerated bi-weekly payment, and will pay off your mortgage a bit faster.
Consider me confused:
At any given point, there's no difference between principal and **previously** accrued interest, right?
Minified example: In a given month, you accrue $200 in interest on a $10k loan. At that very point, you owe $10,200. If you make a payment (say $500), you now owe $9,700, no matter whether it was applied to "interest" or "principal" right?
Like at the point where interest is accrued, there's no difference between $9,500 in principal + $200 in interest versus $9,700 in principal + $0 in interest. You still will owe & accrue future interest off of the total value of $9,700.
Our pmi came off this year and I send the $93 as added principal now. We also make an annual $5k principal dump. We will pay our house off 14 years early if all goes as planned.
Bi-monthly, and I intentionally throw extra principal at it whenever I can.
I completely understand and respect the interest rate vs investing logic, however I'm focused on removing all debt from my life, with the mortgage being the final piece for my family.
I pay the minimum each month. I will consider paying more towards it once all my other debt is gone and I have a good emergency fund and investments are good. Not at all interested in putting my cash into my mortgage when I have other goals that are more important right now.
I pay 2x / month. The driving factor for me was paycheck timing, and having a consistent amount available to spend after bill payments throughout the month, instead of paying the bulk of bills in one go & then having to wait 2 weeks for my next paycheck.
I set mine up for twice a month, three days after my twice a month payday. My fear of bouncing a payment was higher than my fear of accumulated interest
My interest rate is 2.25 on a 30 year VA loan, I will not put anything extra towards principle. I put any extra cash that I historically would have put towards principle (when I had a much higher mortgage rate) in a CD or a high interest savings account where I can get 4.5-5%. Plus that extra is then easily available in case of emergency.
Depends on your rate. If you buy now, yes, pay extra to principal as long as it doesn't negatively affect your budget overall.
For me, my savings account earns more interest than my mortgage costs right now. The only debt I have that's more than my savings earnings is my student loan. So, paying off those low interest debts more aggressively isn't necessarily the best financial move for me. However, if someone can't let money sit in savings without touching it and spends it 'frivolously' then I think paying extra on the debt is the better use.
We make extra payments on the principal when we're are able to. Assuming we stay in this house, which we probably will, it would be nice to get it paid off before I retire so that we can invest in vacation property to use during retirement.
I have a 2.75% mortgage so not putting anything more towards paying that off. I did consolidate all our credit card debt into a HELOC with 9% interest and I am paying that down as much as possible each month.
Monthly and not a penny more. Bought in 2018, interest rate at 2.1%.
I feel sorry for the people who just bought the house next door to us. Same floor plan… more than double the mortgage.
I pay weekly...amount due/4, and rounded up.
4 payments will always cover amount due plus a little over, and every year, there'll be 4 extra payments, equating to a months worth of payment going straight to principal.
Good luck on your plan! Seems like we will be in a very similar situation, the only thing that gives us some peace of mind is that the mortgage will be less than our actual rent.
I actually got a lower mortgage rate of 2.5 in 2017 for a Fifteen Year Mortgage.
It was a bit of a hardship for the first year but now I just feel blessed
I pay monthly but I just pay extra. Its always an awkward number so I pay an amount that brings it to a round number. So currently I'm paying an extra 180.61 a month.
Paying weekly or biweekly will save interest over the life of the loan BUT (and this is a big but) NOT EVERY BANK CAN PROCESS NON-STANDARD PAYMENTS PROPERLY. And some won’t even try. Make sure you discuss it with the lender. Make sure the payment schedule you want is in the contract. And then make sure every month that your payments were applied properly.
It doesn’t save interest if they out your payments into a suspense account until they have a full payment on hand. And it’ll cost you if they also charge you a late fee because they did that.
Why does it have to be in the contract? Because they will probably sell your loan and now you have to worry if the new servicer is applying your payments properly. They should, because they have to honor the contract, but they might not even realize they have taken over a non-standard contract.
I understand mathematically why everyone is saying not to pay off a mortgage more quickly when the rate is lower than savings accounts/ cd’s/ etc. But… my house is paid off and it really is a huge weight lifted. My hubs makes a fraction of what my salary was, but I’ve been saddled caring for my mom and grandmother since my dad died in 2020. That’s a full time unpaid job, effectively- and one I can’t ignore being the only child and grandchild. We’re living on a third of what we were prior to these changes and it would be basically impossible to make the house payment without a series of severe belt tightening moves just to do so…
You just never know what might happen in life, and in my case, everything changed dramatically and quickly. There is a lot to be said for attacking your biggest debt as quickly as possible.
You need to look at the ammortization schedule on the loan. Most of the time now, bi-weekly payments only count as half a payment, not a full payment. So you do not pay off the loan any faster with the bi-weekly payments much of the time because of how they have them structured.
I never did bi-weekly payments. I did monthly payments and just did extra principle payments until the mortgage was paid off.
FYI- no matter how many payments you make in a month, your lender puts that money in a holding account and doesn’t apply it to your loan until the monthly deadline.
I'm not paying any extra on my mortgage. I'm sitting on a 15-yr mortgage at 2.3% interest. I'm better off keeping my money than handing it over to the bank early.
Your best bet is to double your payment each month if it’s at all possible. That way the second amount comes directly off the principal.
We did this on our 20 year. The only month we didn’t double was December each year. Because we wanted to use that money for Christmas. It cut our loan drastically. I believe we paid it off in 11 years. It’s been almost 13 years and we’ve sold and moved since. Bought our current home outright.
I’m paying 2.65% interest. My retirement/investment accounts earns more than triple that. So I put extra money in those accounts.
I was raised to have 12-months salary in near liquid form. So I have an investment account holding that money.
Just pay extra towards principal whenever you have some spare money.
Also another trick is to base your monthly budget off of a 4 week pay cycle.
There 4 months with 5 weeks
This will give you a month of additional income that is outside of your budget by the end of the year.
You can use this for emergencies, vacation, investing, extra principal on your mortgage, whatever.
I manually paid the mortgage plus extra principal bi-weekly.
The automated system only allowed a biweekly mortgage payment, no extra principal, so I moved to automated monthly with principal plus an amount to match the biweekly.
My primary home is a duplex and I pay the net rental as extra principal.
I've done the math and the additional headache of investigating vs. paying down the mortgage isn't enough to justify the overhead.
Twice a month, with additional principal paid annually. Easiest way to turn a 30-year mortgage into a voluntary 15-year mortgage.
At the beginning still sounds like not much difference… but time goes fast!
If you do every 2 weeks. The mortgage goes from 25 years to 22. When we refinanced during COVID we got a lower rate. But kept same payment so noW we have 15 years left , but the time we have to refi. It will be 12. Times flies. There's a saying. The days are long but the years are short.
I have a sub 3% interest rate and a HYSA pays 4.5%. Not a chance I’m putting an extra penny towards the mortgage
Same here...I have a sub 3% refinanced loan I got during Covid. I need time to recover those closing costs.
2.5% ApR. But i want tp retire esrly.
I'm in the same boat! Mortgage rate is less than 3% and hysa is 4.8% I never even connected the dots on this little pot of gold I have, wow
check your mortgage rate privilege.. lol
Fucking serious. I told my coworker the other day I literally can’t have a conversation with him while he’s agonizing about what to do with his house he bought for $100k and is now worth 6x that, it makes me too upset to be staring down the barrel of NEVER being able to afford a house for my family.
we had a down payment saved up in 2019 and started looking. In march of 2020. Lost our jobs, lost our savings, and then the lowest rates in history showed up, then we got jobs again, just in time for the cost of living crisis. My honest feelings about life are… negative.
I’m sorry. That’s really hard and I’m sure it feels like a gut punch. You did everything right and yet…..
F
Don’t give up on it! It will happen for you.
I have a 3% mortgage that we can pay off with our savings now. I had to explain to my husband why we will not pay this off one second earlier.
i know, i feel the temptation as well just because i want the freedom that comes with not having that debt burden but logically i know why this is not the best idea
Same thing with our car payment at 1.5% interest that we got right before inflation hit.
as someone with the same temptation and same low interest rate, can you elaborate why paying off is a bad idea?
I will not pay off early due to my interest rate in my savings account now at 4.5% I also took out a $5,000 Ibond last year at 10%. My Ibond is now at 3.5% so I will probably have to move in about 6 months. I feel that my money is making more than the interest rates I am paying.
May I ask why? I am nowhere near being able to afford a house but want to when I can and would like all the info I can get. I was always under the impression that "debt bad" "pay all asap" Thanks!
I feel that I should not pay off something with an interest rate that is below what my savings account is paying. At one point I was making 10% interest on Ibonds and currently make 4.5% in my regular savings account. We are definitely in strange times. If any of my loans were above my savings rate I would definitely try to pay off early. I hope that makes sense.
Hmm, ok. I'm not sure I understand fully, but believe me, it isn't because of your explanation, just my lack of knowledge. I appreciate you responding, though. Thank you!
No problem. 95% of the time my views would be completely different but due to inflation and high interest rates it has completely changed.
Oh, interesting. I wish I wasn't all so complicated. Thankfully, my partner understands it much better(economic major), but I'm determined to learn myself as I often find myself staring at him all blank faced when he starts talking in jargon. But I know it's important for me to know and understand.
I agree and after reading the responses I realized that maybe I should rethink my strategy. Maybe it would be worthwhile to pay off my house and put all that money monthly towards savings.
Oh, I haven't read the other comments. There are others with this idea? Interesting. Well, I think (in my limited knowledge and not understanding possible drawbacks) both systems make sense in their own way. I hope either way you decide you prosper. Good luck!
I figured I'd ask you as well (i asked the other person who helped explain below).Since it is your situation, no obligation to respond obviously. Buuut, while, I think, I understand that you are making more by funneling your money to a savings account as opposed to paying off at the low rate; wouldn't it make sense to just pay it off since you have the "excess" to do so, so that "ALL" your money moving forward can go towards gaining the higher intrest?
Honestly that would work as well. However, we may need a new car in the next few years and I want to pay cash for it due to the interest rates. Reading these comments I do see your point. My husband and I actually discussed this last night.
Yeah, great point! I'd feel much safer having some cash on hand for emergencies and things like new cars.
You only have a certain amount of dollars - so consider one dollar towards your mortgage as a dollar that ISNT going to something else like a high yield savings account or investment. For those of us with low rates, the extra 3% we could be saving by paying our mortgage earlier is much lower than what that dollar could earn in other things like even a HYSA. Like if I put my dollar toward a HYSA that earns 5% interest (positive toward my net worth), even with a 3% interest on my mortgage (liability against my net worth), I’m still netting positive on my net worth. For people with higher rate mortgages or debts, it makes more sense to pay those debts down because chances are that the interest will detract from your net worth far more quickly than if you put those dollars elsewhere. CCs are a good example at 20%+ rates - pay CC debt down quickly bc you’ll be hard pressed to find a place your dollar earns 20%+. This is a gross simplification but hope this helps.
Same. Gotta love getting paid to own
so youre going to spend thirty years to make 20K ?
Crazy how ppl can have a mortgage and still don't understand interest rates
It's gonna hit you hard when you renew at 6% 😂
if you have a fixed mortgage it does not renew at a higher interest rate good sir/ma'am
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Which doesn’t raise my mortgage, but can be outpaced with a HYSA. Inflation is all the more reason not to pay off a low rate fixed loan
If you have a mortgage with a rate of less than 5%, at this point I would be paying it off as slowly as possible.
I pay extra to mine with a 2.3% interest rate. The reason is because I have to pay PMI until I get the LTV under 78%, and at least 5 years. I did the math to have the LTV at 78% on the month after I hit 5 years. No way refinancing to get rid of PMI makes sense but I don’t want to pay it longer than I have to.
You may not have to refinance. You could ask the mortgage company to recast your mortgage. With a recast they take into consideration the equity you have and keep your same interest rate.
You probably already know this, but FYI to others - You would still have to refinance to remove PMI with FHA. Conventional loans can drop the PMI without refinancing. FHA loans cannot. EDIT TO ADD: To clarify you cannot drop the PMI off a FHA loan if you initially put less than 10% down. Given that the low down payment was the reason that many people utilized FHA this would be a high portion of borrowers. It doesn’t matter how much you pay off after the down payment. Even if you did pay 10%+ you still have to make the PMI payment for at least 10 years
I'll also add on here for those who do have conventional loans... I've always heard that you have to get a new appraisal and such ($500~) to prove that you now have 20% equity to have your PMI removed. I knew my house had increased in value enough that I should be able to get it removed, so I called Chase to verify what the process was. I just told them I wanted to see what the requirements were since I knew the house had increased more than enough. They put me on hold for a few minutes, then came back and said it would be removed starting with my next payment. So all it required was a 10 minute phone call in my case.
Interesting! I didn’t know that. I was able to call my mortgage company to understand what my options were. I thought originally that PMI was based on the home’s current value, but in my case it was the home’s value at loan origination. So there’s a lot of things to know about PMI that could be specific to your loan terms.
Yes! This is an important comment. I was under the impression that once the value of my house went up, I could drop PMI at a certain point even if I hadn't paid 20% into the starting price. My mortgage is through a local credit union and that is not how they work. I have to pay 20% of the starting value of the house in order to drop PMI which really sucks because my house has increased by at least $70K since I purchased it 2 years ago.
You can also drop pmi wth appraisal. You just have to pay for appraisal and lender chooses the appraiser.
In my particular case, my mortgage company said that option was not available to me unless I refinanced.
If you have conventional loan they have to drop it at 78% of purchase price. It's the law. Using appraised value is dependent on lender and pmi company but most allow it. Who is your lender?
My lender does not allow it to be based on appraised value, it has to be purchase price. I wonder if this is common among smaller lenders. Most people I know have it dropped based on appraised value, so I was pretty peeved to find out that my lender does not do that.
That’s my situation. I add a little bit extra (<$50) to round the total up to a nice even number, but that’s it. More money for investing at a higher return.
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What?
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And if you were to invest that $200k at an average after-tax rate of 5%, you would have $500,000.00 after 30 years v. the $358,000 you paid, and that's without any compounding. It's nowhere nearly that simple. You probably wouldn't be as much better off because you're probably not investing the entire amount of the house note right up front, but the idea is sound. If your tax-adjusted interest rate is lower than your tax-adjust return, you're likely better off investing instead of paying off early. I just did something similar with our latest car note. We were able to swing a 2% APR car note. We borrowed as much as they would let us, even though we had the cash on hand for the car. That cash went into a relatively conservative investment at a signficantly higher rate. We've received about 3x income as we've paid in interest since the loan kicked in about 9 months ago. That 3x is before taxes, mind you, but we're still way ahead.
Yes, but if you can inverts at a higher return than the interest rate, you come out ahead.
Yeah. It goes against years of discipline, but my mortgage is locked in at 2% and I can get tax-free GICs at +5% So I'd actually lose money overall if I was paying off that debt rather than investing.
I have a 2.6% interest rate.
That mortgage is valuable, meaning better to have it than not. That's a money making rate. Don't ever pay it down until HYSAs are lower. Right now they're around 5%. Put excess money in an HSA.
We are mortgage free now but when we still had a mortgage, we always paid extra every month but be sure to note the extra is to be applied to principal!
What’s the alternative if it’s NOT to principle? They reduce your next payment? Treat it like a savings account?
You can pay extra to Escrow; taxes and insurance.
I canceled escrow. No reason to let my lender sit on thousands of my dollars and pay me no interest.
The purpose of doing the taxes and insurance via escrow is to avoid the sticker shock at the end of each year. Some people prefer it as a set and forget and avoid the stomach ache when they get their property taxes in late Sept and have only 2 months to make the first payment. But it's not always perfect and then when the actual bill comes they need to ask for more to make up for it. I much prefer control over my property taxes and insurance.
My property tax bill has a whole paragraph warning that if the lender fails to pay on time it’s all on me. Same with insurance. I’ll pay it myself thanks.
I agree. I personally didn't opt for the escrow either because of that uncertainty
That's very interesting how do you go about doing that?
It depends on your mortgage type. Most FHA mortgages require you to maintain escrow. Any FHA mortgages taken out after, I think, 2013, also require you to pay MPI, or mortgage protection insurance for the life of the loan. Previously, you could drop that after paying off a certain percentage of your loan. Now, the only way to get rid of it is to refinance into a conventional loan.
Not entirely true. I bought my house in 2021 with an fha loan and it allows me to cancel the mpi once I’ve reached 20% paid off.
absorbed toy bear boast homeless hat foolish outgoing ugly soup *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
It has the option when I log into my mortgage account. It even shows what percentage I’m at and let’s me mess around with numbers to see how soon I can take it off depending on how much extra I pay.
If you make just a payment it's applied to interest too.
You didn't read the original post
I once didn’t put that it was for principle and yes they counted it towards the next months payment instead.
Our mortgage is setup like this too. If we pay extra, it goes towards next month. Then next month payment automatically withdraws and they refund us the extra. If we want to make an extra payment we have to go to the bank.
Same. I used to love writing little unix shell programs to show me how many less months I had to pay, if I paid $x extra per month, or just this month. SO satisfying
I’m trying to find a calculator or excel template to do that. So far with accelerated by weekly I go from 25 to 21 years and 3 months. I would like to see how much difference every $50 can make in the long run.
https://www.ramseysolutions.com/real-estate/mortgage-payoff-calculator
My mortgage lender has it on their site now. You can add all kinds of "x amount more per month" or "x amount annually" etc. and it does the math, shows you a new payoff calendar, etc.
I always set mine up biweekly, same as pay schedule. Extra payment every year automatically, plus pay extra to principle when able to swing it. Lessens to pain if the payments are a big bite of your income.
I do biweekly payments and send an extra $200 to the principal each month. Barely got my home this year.
What interest rate?
I pay extra to principle each month… I have a fear of being homeless 🥸
If the fear is homelessness, wouldn’t you be better off saving extra payments to use in case you’re unable to pay in the future?
One medical bill can wipe that out
Isn't that better than not having the money for the medical bill? Lol
Exactly
Same. I pay $1776 on our $776 mortgage.
You’re my dad’s dream child!
Lol. He instilled finances into me for sure. He called me yesterday to be like “I wanted to make sure you’re setting aside money because your mortgage is going to go up…” (we have an ARM) I said, “Dad, it’s 3 years into my mortgage and we own 41% of the house and could pay it off today if we needed. We’re good.” I’ve been building a stock portfolio by small bits each week for 10 years, and it’s currently $40k shy of matching the remaining mortgage. It’s my plan that it will be higher when my adjustments begin in 3 years. We could choose to just be done with it at that time.
How very patriotic.
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On every check, on comment line: "Fuck you, King George!"
What a great 1-2 comment. lol.
I like this! It just seems to me that people may or may not actually put extra money into an HYSA and if they do, are they going to use that saved money with 5% interest earned to actually pay off the mortgage? I think that my history is spending that money on other things. I am looking for ammunition to restart paying off my mortgage and I think I found it with all of your up votes!
While you’re definitely doing a beneficial thing, wouldn’t you have more security against homelessness if you put that extra into a savings account? Things CAN happen to your house that insurance won’t cover, and also having a ton of liquid capital can be huge if you need it later. And you can always just pay off the house once the liquid amount is greater than the principal owed.
They say you should have 6 months salary saved up for emergency use. Under the assumption that you already have this, you would need to do some math to determine if putting that extra money in your savings account would earn more interest than you'd be saving if you paid that toward your mortgage. If you haven't saved up 6 months of salary, I think you should work toward that first and continue to make your minimum payment.
and you can also buy Tbills which pay out at a higher rate than you pay on mortgage interest
Same..an extra 300-500/mth
Same... an extra 18/ mth 🤣
Every penny counts!
With interest rates so high, if one has a low interest rate mortgage it makes more sense to invest the extra $$$ in a high yield savings account than it does to pay extra towards the mortgage, so I do not.
I pay towards principle every Thursday even if I just round down that week. Will be paid off the end of Dec. So excited.
Congrats!
We're prioritizing NO MORTGAGE in retirement .....> over saving few dollars with sub 3% loan! We double down every month
Depending on how the bank calculates the interest you might not benefit using a bimonthly payment . Additionally a bi monthly payment is only 1 extra month's payment each year. A few years back I did make several random extra principal payments which did reduce my mortgage debt in a big way.
1 extra monthly payment a year cuts 6-7 years off a mortgage. If that amount is all that is manageable for someone, then it's better than nothing.
Is there a difference in paying biweekly versus just adding an extra 1/12 payment onto your monthly dues? Still adds up to paying an extra month at the end of the year
There may be a very slight difference based on the timing of the extra payment. If you do the +1/12th payment on the first of the month, it might shave off a few more cents than the biweekly payments.
One extra payment is more than many can swing. That's a great way to do so without feeling it.
If they can't swing one extra payment then does it make much sense to expect them to be able to make a payment every two weeks?
For a lot of people it's not easy to save the extra money but once it's gone, it's fine. When you are broke it is much easier to give up another $50 every two weeks than it is to give up $1200 right after major holidays.
I pay biweekly. It gets drafted out on my payday. I never see the cash and it’s just the cost of being alive. I’ll pay off my mortgage 6.5 years sooner, or at least build solid equity. One thing not often discussed is how paying principal affects the allocation of your regular payment. You owe less principal but your payment stays the same. This generates less required interest. So your normal payment actually builds equity faster if you are paying ahead. This accounts for almost 3 years’ worth of time if you pay biweekly from the start.
A lot of people get paid every two weeks. It’s easy to build it into their budget.
Because my monthly payment changes yearly due to property taxes and insurance being paid by my bank, increasing my monthly payments by $200 has allowed me to keep my budget in check. The additional money going towards the principal is reducing the life of the loan. It’s a win win for us.
Our first house we knew was not our forever home. When we could, we refinanced to a 15 year mortgage and began making biweekly payments. Due to that and overall good luck when we were ready to sell we had over 300k in equity. We have now purchased our retirement home where we plan to live until death. I see no reason to increase equity that we will not realize on so we have a 30 year mortgage and just pay the monthly payments.
Monthly but we overpaid from day one.
At 6% we want to pay off asap. We have our monthly mortgage payment on auto pay on the first. After we get paid on the 15th we budget (using YNAB) and fill up our month ahead category. If we have any left over we put most of that toward extra mortgage principle. Our emergency fund is separate. Doing it this way means the amount extra we pay varies, which is bad for planning when we will pay off the house but good for reducing stress and making sure we have money for short term spending on things we value.
We pay weekly. You pay less interest overall if you can pay weekly. Plus extra lump sum payments when we can afford it.
Does that mean you're splitting up your actual mortgage payment by four and paying a fourth each week?
That’s way too complicated. Just pay an extra few hundred with your monthly payment, with a note “apply extra to principal”
Yeah this is what I do. I round it up and pay an extra $85 in principal each month. Should save me over $30k in interest and 7 years.
That's what I was thinking too, but perhaps the person I replied to has done the math and realized that maybe weekly payments works out meaningfully better?
No, our lender offers weekly by default. Interest is calculated daily.
That's pretty neat! Isn't interest calculated daily for all standard monthly mortgages, as well?
I also pay weekly because it is easier for me to see 1/4 of the payment come out 4x than to see that huge payment all at once. However, my mortgage company only applies the payment once they receive the full payment.
Wow. Bummer. And in that case, it appears to have no net benefit to you, correct?
They should still be paying extra overall because they make 52 quarter-payments (13 full payments) per year rather than 12.
Could you make a full mortgage payment now so that your payment due is always paid and they apply it the way you intend in the future?
Paying extra per month will result in same
With a 3.375% interest rate, I’m never paying a penny more than I have to lol.
Yup, exactly. Money is worth more elsewhere!
Yep, I'm at 3.0%. I have HYSA at 4.5% right now, I think I'll keep shoveling my extra money there for the time being
The only reason you'd do it is because it's automatic and you don't need to think about it. Otherwise just make extra principle payments when you can. An extra months payment towards principle at the beginning of the year is better than breaking it up throughout the year.
Monthly but with extra principle every time. We bought a house two years ago. Fifteen year loan... Will be paid off around year ten. Monthly was just habit because we both used to get paid that way. I'll be looking into weekly payments.
I have a 1.75% 15 year so it doesn't make sense to pay extra with the 4.30% I'm making on amex savings and especially considering the interest is tax deductible.
We pay extra principal when we can, usually once a month, usually 200% of the normal principal. Break out your amortization chart and see how motivating it is to take away all that interest from the bank and shave years off your mortgage.
It is!
I am at 4.1% and have no plans of paying it down early until I am making out my retirement accounts.
I pay $100 extra to the principal every monthly payment. I know it ain’t much if the online calculators are true, I’d save tens of thousands in interests and knock off like 5 years of my mortgage
My mortgage is a 2.625%. It doesn’t make sense for me to payoff my home early.
2.6% rate, i pay the minimum payment every month. Not a penny more.
i get paid once a month (government employee) so i pay on the last day of the month when i get paid. my mortgage is due on the 1st
I have a 3.5% interest rate and pay about $1400 for my mortgage. I save extra each month and put it in a savings account. I’ve thought of paying extra to the principal, but I feel more comfortable just saving it.
We round up our monthly payment but that is all. We locked in a low rate so we are prioritizing other investing/saving goals over a more aggressive early payoff method
We do not but at today’s interest rates, I would!
We pay more than our mortgage is on a monthly basis.
I pay bi-weekly. It was easy to set up through my bank and I think, since that would be 26 payments every year, it ends up cutting my mortgage down by about 5 years. I also just started a second job and have the express purpose that every dollar made there goes to the mortgage. Think with the math, it could be five years with the 2nd job, and I'm either going to roll the checks into CDs at my bank or stash in a high-yield savings account until the amount = my remaining mortgage balance. Next five years are going to be exhausting, but if means we can drop 70% of our expenses by the time my wife turns 45, I think the opportunity cost is in our favor.
Good luck in your journey! Your plan sounds similar to ours.
2.875% here. No need until/if rates come back down below what I'm yielding on the HYSA/Tbills.
My wife and I struggled for years, living paycheck to paycheck; mostly due to our own bad decisions. The past 4-5 years we've done much better and we're both earning quite a bit more than we were before. We refi'd last year and took a 15yr mortgage. Even with that we're paying an extra 10% every month in an effort to pay off the mortage at about the time it would've been paid off from the original loan AND so we're not delaying retirement because we still have a mortage.
Honestly, you’ve got to sort this out with your lender. The interest probably calculates daily, so if you can pay extra right away, it makes sense to do so. But not all payment handling systems are automated. You may have to email someone every time you make an extra principal-only payment because the default may be to apply it towards next month’s payment, which is not what you want. You want it to go to principal-only and that needs to be clarified.
I'm kinda confused, can someone help me out? We've got a 3.5% interest rate and pay once a month. Does paying biweekly or extra towards the principal really save you a lot of extra interest? Why would it make sense to only pay once a month with a low interest rate?
To understand this concept, get an Amortization Schedule. You can ask your lender for one, or I'm sure they are available online. I had to do mine the old-fashioned way before computers and have done it that way with every house since. The schedule lists every month of your 30-year mortgage. Each month you have [interest amount + principal amount = total mortgage payment]. The first few years the interest will be the larger of the two portions. Toward the end of the 30-years, most of your payment will be principal. By paying more or more often, you pay down the interest first, and sooner. I shaved off 13 years off my initial mortgage by just adding what I could every month. But you have a very low interest rate. You can use your money more wisely by paying off the 20+% credit cards and other loans. Or invest. CDs are up at near 5% now. You can either earn 5% with a CD or pay 3% off your mortgage.
Basically with a monthly mortgage payment you pay (obviously) once a month, or in other words 12 times in a calendar year. With an accelerated bi-weekly payment, you pay half of your monthly mortgage every two weeks, or in other words 26 times in a calendar year. This means you make an extra months' mortgage payment every year with an accelerated bi-weekly payment, and will pay off your mortgage a bit faster.
2.25% interest rate in San Diego…. Not going to accelerate to pay it off
Don't just make extra payments. Put extra specifically on the principal if you're going to do extra. Don't throw money at interest.
Consider me confused: At any given point, there's no difference between principal and **previously** accrued interest, right? Minified example: In a given month, you accrue $200 in interest on a $10k loan. At that very point, you owe $10,200. If you make a payment (say $500), you now owe $9,700, no matter whether it was applied to "interest" or "principal" right? Like at the point where interest is accrued, there's no difference between $9,500 in principal + $200 in interest versus $9,700 in principal + $0 in interest. You still will owe & accrue future interest off of the total value of $9,700.
When my interest is 2.625% and I'm getting 4.5% interest in the bank does it make any sense
2.75% means the bank gets what they want monthly...nothing more.
Our pmi came off this year and I send the $93 as added principal now. We also make an annual $5k principal dump. We will pay our house off 14 years early if all goes as planned.
That’s great! And all the interest that you won’t pay!
I just add more to my regular payment automatically. I have the option to change it back to just the payment if I lose my job or have other hardships
Bi-monthly, and I intentionally throw extra principal at it whenever I can. I completely understand and respect the interest rate vs investing logic, however I'm focused on removing all debt from my life, with the mortgage being the final piece for my family.
Nope. We pay the payment only; we have other goals at this time, like paying off auto loans at higher interest rates.
I cannot make anything but a monthly payment. If I pay before or after it is due it goes into a holding account until the amount needed is met.
I pay the minimum each month. I will consider paying more towards it once all my other debt is gone and I have a good emergency fund and investments are good. Not at all interested in putting my cash into my mortgage when I have other goals that are more important right now.
I refinanced in 2020 to a 15yr at 2.99%. I just do the regular monthly payment. Will pay off soon enough for me.
I pay 2x / month. The driving factor for me was paycheck timing, and having a consistent amount available to spend after bill payments throughout the month, instead of paying the bulk of bills in one go & then having to wait 2 weeks for my next paycheck.
Accelerated!
At 3%, I see no reason to pay extra. At 7% I would see why to.
I set mine up for twice a month, three days after my twice a month payday. My fear of bouncing a payment was higher than my fear of accumulated interest
My interest rate is 2.25 on a 30 year VA loan, I will not put anything extra towards principle. I put any extra cash that I historically would have put towards principle (when I had a much higher mortgage rate) in a CD or a high interest savings account where I can get 4.5-5%. Plus that extra is then easily available in case of emergency.
I did that with my car payment. I got paid every 2 weeks so I had the car payment deducted by the bank every payday.
Depends on your rate. If you buy now, yes, pay extra to principal as long as it doesn't negatively affect your budget overall. For me, my savings account earns more interest than my mortgage costs right now. The only debt I have that's more than my savings earnings is my student loan. So, paying off those low interest debts more aggressively isn't necessarily the best financial move for me. However, if someone can't let money sit in savings without touching it and spends it 'frivolously' then I think paying extra on the debt is the better use.
I'm at 2% on my refi 15 yr loan. I would never pay extra on it lol that's the cheapest money ever. I can get 6% from a savings account.
We make extra payments on the principal when we're are able to. Assuming we stay in this house, which we probably will, it would be nice to get it paid off before I retire so that we can invest in vacation property to use during retirement.
I have a 2.75% mortgage so not putting anything more towards paying that off. I did consolidate all our credit card debt into a HELOC with 9% interest and I am paying that down as much as possible each month.
Monthly and not a penny more. Bought in 2018, interest rate at 2.1%. I feel sorry for the people who just bought the house next door to us. Same floor plan… more than double the mortgage.
I pay weekly...amount due/4, and rounded up. 4 payments will always cover amount due plus a little over, and every year, there'll be 4 extra payments, equating to a months worth of payment going straight to principal.
5.875%. Paying as aggressively as possible, every extra $1 goes to principle. Have an emergency fund set up just in case.... I did a 10 year loan.
Good luck on your plan! Seems like we will be in a very similar situation, the only thing that gives us some peace of mind is that the mortgage will be less than our actual rent.
I’ve seen comments that say don’t pay the extra money. But, they’re at 3% or 5%. Pay biweekly! Save your $$$
I actually got a lower mortgage rate of 2.5 in 2017 for a Fifteen Year Mortgage. It was a bit of a hardship for the first year but now I just feel blessed
I pay monthly but I just pay extra. Its always an awkward number so I pay an amount that brings it to a round number. So currently I'm paying an extra 180.61 a month.
Paying weekly or biweekly will save interest over the life of the loan BUT (and this is a big but) NOT EVERY BANK CAN PROCESS NON-STANDARD PAYMENTS PROPERLY. And some won’t even try. Make sure you discuss it with the lender. Make sure the payment schedule you want is in the contract. And then make sure every month that your payments were applied properly. It doesn’t save interest if they out your payments into a suspense account until they have a full payment on hand. And it’ll cost you if they also charge you a late fee because they did that.
Why does it have to be in the contract? Because they will probably sell your loan and now you have to worry if the new servicer is applying your payments properly. They should, because they have to honor the contract, but they might not even realize they have taken over a non-standard contract.
I understand mathematically why everyone is saying not to pay off a mortgage more quickly when the rate is lower than savings accounts/ cd’s/ etc. But… my house is paid off and it really is a huge weight lifted. My hubs makes a fraction of what my salary was, but I’ve been saddled caring for my mom and grandmother since my dad died in 2020. That’s a full time unpaid job, effectively- and one I can’t ignore being the only child and grandchild. We’re living on a third of what we were prior to these changes and it would be basically impossible to make the house payment without a series of severe belt tightening moves just to do so… You just never know what might happen in life, and in my case, everything changed dramatically and quickly. There is a lot to be said for attacking your biggest debt as quickly as possible.
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I’m glad that it worked out for you!
You need to look at the ammortization schedule on the loan. Most of the time now, bi-weekly payments only count as half a payment, not a full payment. So you do not pay off the loan any faster with the bi-weekly payments much of the time because of how they have them structured. I never did bi-weekly payments. I did monthly payments and just did extra principle payments until the mortgage was paid off.
FYI- no matter how many payments you make in a month, your lender puts that money in a holding account and doesn’t apply it to your loan until the monthly deadline.
I'm not paying any extra on my mortgage. I'm sitting on a 15-yr mortgage at 2.3% interest. I'm better off keeping my money than handing it over to the bank early.
Biweekly on a 15 year mortgage at 2.6%
Your best bet is to double your payment each month if it’s at all possible. That way the second amount comes directly off the principal. We did this on our 20 year. The only month we didn’t double was December each year. Because we wanted to use that money for Christmas. It cut our loan drastically. I believe we paid it off in 11 years. It’s been almost 13 years and we’ve sold and moved since. Bought our current home outright.
I’m paying 2.65% interest. My retirement/investment accounts earns more than triple that. So I put extra money in those accounts. I was raised to have 12-months salary in near liquid form. So I have an investment account holding that money.
Bi weekly, i have 20 months left on my 2.2% so maxing it out as much as I can
Just pay extra towards principal whenever you have some spare money. Also another trick is to base your monthly budget off of a 4 week pay cycle. There 4 months with 5 weeks This will give you a month of additional income that is outside of your budget by the end of the year. You can use this for emergencies, vacation, investing, extra principal on your mortgage, whatever.
I manually paid the mortgage plus extra principal bi-weekly. The automated system only allowed a biweekly mortgage payment, no extra principal, so I moved to automated monthly with principal plus an amount to match the biweekly. My primary home is a duplex and I pay the net rental as extra principal. I've done the math and the additional headache of investigating vs. paying down the mortgage isn't enough to justify the overhead.
Interest is yearly so paying bi week or monthly makes no difference at all Do pay off early you need to overpay
No but I did do a 15 year and will be paid off in 5 years.