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Kodiakk
I've heard rumor about sending your house note broke up into two payments a month. I was told even though you send the same just in two payments, it saves you money on interest.

Anyone heard of this? Mind explaining how it works or linking a website explaining it?
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Comments

11 comments

Date Votes
  • bgjohn
    It sure does!
    JM
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  • River Rat
    I'm no expert, but it boils down to sending in a half-month's payment every two weeks -- which amounts to one extra payment a year. You can do the same by just adding a few hundred bucks to each monthly payment. It goes straight to the principal, and shortens the length of the loan and therefore the amount of interest.
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  • Idahobound
    I did this on my 1st house. the biggest savings is that if you send a payment every 2 weeks you will make 13 full payments a year rather than 12 if paid monthly
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  • Ox190
    yes it does save you money. Do a google search for bimonthly amortirization schedules
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  • select-fire
    Play with this to figure what you will save..

    http://www.mortgage-net.com/calculators/mp_cl.html
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  • slipgate
    The important thing is NOT to pay anyone to do this for you. It is a total ripoff. Do it yourself by either the biweekly payment, resulting in 1 extra payment per year, or better yet, just make an extra payment in January for that year and then make payments as usual. This method results in greater savings.
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  • ripley16
    Both payments must be made before the late date for that month's payment. In other words you'll have to pay about two weeks early on the first payment. Any late fees will negate interest gains.
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  • tomahawk
    if you have pre payoff rights you can already do this by including a principal payment with your regular payment. this by weekly thing is another way to press you if you get in trouble, dont do it in my opinion
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  • Nwcid
    I thought that part of the idea of the bimonthly payments was that you were paying less interest for half the month. Say you have a $1500/mo payment. You pay $750 half way through the month then you are paying interest on $750 less for 2 weeks. This then compounds and where part of the savings come in. Am I wrong on this?
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  • gunnut505
    Just pay an extra $125/mo. on Principal and save several years' worth of interest while shortening the life of your loan.
    Or, for faster savings, pay an extra 1/4 of your regular payment as principal on a 30 year loan and save MILLIONS!
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  • Kodiakk
    quote:Originally posted by Nwcid
    I thought that part of the idea of the bimonthly payments was that you were paying less interest for half the month. Say you have a $1500/mo payment. You pay $750 half way through the month then you are paying interest on $750 less for 2 weeks. This then compounds and where part of the savings come in. Am I wrong on this?







    This is what I'm talking about. I know about making extra payments. I'll be doing that in addition. I just want to try and be smart and minimize my interest, however I have a good rate but still.
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