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Tami · Joined: 02 Feb 2011 Posts: 1 1.34 Dollars($)

My new mortgage will not allow a bi-weekly payment. So I am trying to figure out the addtional amount I should pay towards prin. each month to shorten my 20 year loan. Org amount 225,000.00 at 5.125%.

tomburris · Posted: Wed Feb 02, 2011 3:36 pm Post subject:

Any extra amount towards principle will reduce the term.

There are calculators on the internet that will let you run some scenarios.
1 good way is to set your tax deductions to where you always get a refund. make and extra pmt each yr with the refund.

jveenstra · Posted: Wed Feb 02, 2011 4:25 pm Post subject: 20 Years

Pay monthly principal and interest $1,500.48.

Bi-weekly plans are no good in my book anyway, but, probably work ok for some people. A bi-weekly results in one extra payment of principal and interest a year. If you take one P&I payment and divide by 12 and pay that amount extra every month, the loan will pay off within 1 to 3 months same as a bi-weekly would have

jimgilly · Posted: Thu Feb 03, 2011 3:03 am Post subject:

A bi-weekly payment is mainly a convenience factor for someone who gets paid every two weeks and has a lender that will accept and apply credit these payments as received.

Basically, with a bi-weekly you end up making one extra payment per year and you can get approximately the same results by taking 1/12th of your regular monthly principal and interest payment and adding that monthly to your scheduled payment.

For example, with your loan numbers, a lender who offers a bi-weekly where payments are credited bi-weekly as received would save you a total of $20,170 over the term of the loan. If you just make an extra payment of $126.35 you will save $19,765.

The sooner into the loan you can make extra payments, along with the amount and frequency will all have a bearing on how quickly you can pay down the interest charges and build equity.

jimgilly · Posted: Thu Feb 03, 2011 3:06 am Post subject:

Just to clarify, I meant to say just make an extra payment each month of $126.35 with your regular mortgage payment. And make sure it is noted that is to applied against the principal.

crichter · Joined: 28 Dec 2010 Posts: 34 8.56 Dollars($)

Tami,

Why aren't you just switching to a 15 year and saving at least .5% on your mortgage? That's +/- $1250/year in interest savings, going up each year. Mortgage rates have been pounded the past few days, but you can still save .5% today..or get prepared and then lock on a rally.

If a bi-weekly payment is $/- $1625/mo and pays off over 17.5 years, why not look at an extra $100 for the 15 year and avoid those 30 payments of $1,625/month in the future?

As for Tom's advice, no, please don't do that. That is exactly the opposite of good financial advice. Ideally, you'd adjust your W4 to have ZERO refund. They don't pay interest on that money of yours that they hold all year.

My $0.02,
Chris

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How to shorten my 20 year fixed rate loan.

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