Mortgage Payment plan

[Kroze]

Does anyone know what's the benefit of paying your mortgage bi-weekly vs. paying them monthly?

 

[Sluggo]

It goes like this:

52 weeks in a year, so you make 26 payments. In effect you made 13 monthly payments in one year.

You can get a regular loan, make one extra principal payment every year and get the exact sameresults.

The end result being your loan pays off quicker since you are reducing the principal, therefore reducing the amount of interest that is calculated upon the outstanding pricipal amount.

 

[spidey07]

Originally posted by: Sluggo
It goes like this:

52 weeks in a year, so you make 26 payments. In effect you made 13 monthly payments in one year.

You can get a regular loan, make one extra principal payment every year and get the exact sameresults.

The end result being your loan pays off quicker since you are reducing the principal, therefore reducing the amount of interest that is calculated upon the outstanding pricipal amount.

which might not be a good idea.

talk to your accountant and work the numbers.

 

[Sluggo]

Originally posted by: spidey07

Originally posted by: Sluggo
It goes like this:

52 weeks in a year, so you make 26 payments. In effect you made 13 monthly payments in one year.

You can get a regular loan, make one extra principal payment every year and get the exact sameresults.

The end result being your loan pays off quicker since you are reducing the principal, therefore reducing the amount of interest that is calculated upon the outstanding pricipal amount.

which might not be a good idea.

talk to your accountant and work the numbers.

How can it not be a good idea? The only advantage could be the mortgage interest deduction on your taxes and that only applies if you itemize, which most people dont.

Say you pay 10k a year in interest on your mortgage and are in a 30% tax bracket. Why would you send the bank 10k to keep from paying the IRS 3k?

 

[spidey07]

Originally posted by: Sluggo

Originally posted by: spidey07

Originally posted by: Sluggo
It goes like this:

52 weeks in a year, so you make 26 payments. In effect you made 13 monthly payments in one year.

You can get a regular loan, make one extra principal payment every year and get the exact sameresults.

The end result being your loan pays off quicker since you are reducing the principal, therefore reducing the amount of interest that is calculated upon the outstanding pricipal amount.

which might not be a good idea.

talk to your accountant and work the numbers.

How can it not be a good idea? The only advantage could be the mortgage interest deduction on your taxes and that only applies if you itemize, which most people dont.

Say you pay 10k a year in interest on your mortgage and are in a 30% tax bracket. Why would you send the bank 10k to keep from paying the IRS 3k?

work the numbers over the long haul. Depending on your goals you come out very much ahead by using a full 30 year mortgage.

and BTW, most people DO itemize...if they don't they love giving money away.

The answer of "is it a good idea to pay off my mortgage early" is...

It depends.