Mortgage Payment HACK
Congratulations on your new home! I recently closed on mine too, and you know what they say, new house, new money strategies. So, how are you planning to pay off your mortgage? If you're thinking about just making the monthly payments, I've got a game-changing tip for you.
The Bi-Weekly Payment Strategy
In a casual conversation with a friend, I learned about the power of making bi-weekly mortgage payments. Instead of making the traditional 12 monthly payments a year, you make 26 half-payments every two weeks. This seemingly small change can have a significant impact on your mortgage payoff timeline - about 6 years earlier, to be precise.
Saving Thousands on Interest
The beauty of this strategy lies in the extra payment you make each year. By the end of the year, you've essentially made one extra monthly payment. Not only does this expedite your mortgage payoff, but it also leads to substantial interest savings. Who wouldn't want to save thousands while becoming a homeowner?
Principle Reduction is Key
Now, here's the crucial part: when adopting the bi-weekly payment method, ensure that your extra payments are applied to the principal balance, not the interest. Why? Because the interest is recalculated monthly. By directing the additional funds to the principal, you're reducing the overall amount you owe and, subsequently, the interest owed.
The Math Behind the Magic
Fast forward five years, and I can't believe I only have five more years until I own my house outright! The mortgage payments are winding down, and the satisfaction is immeasurable. My friend, who adopted the bi-weekly payment strategy alongside me, achieved the same feat.
Take Action and Save Thousands
The trick is simple - look at your payment cycle in terms of weeks, not just months. Make payments every two weeks, and watch as your mortgage balance decreases faster than you thought possible. Don't forget to call your lender and emphasize the importance of applying the extra funds to the principal. This strategic move unlocks the potential for substantial savings.
The Bottom Line
As the math is mathing, the outcome is clear - you could save thousands and pay off your mortgage years earlier by adopting the bi-weekly payment strategy. Follow me for more money tips and stay rich on your homeownership journey!