Microcamtest

checking the microphone and webcam

Should You Make Bi-Weekly Mortgage Payments Instead of Monthly Payments?

The Parts of Your Payment

Just as a review, let’s go over the parts of your mortgage, after all, it’s not all just the part we call the “payment.” Your mortgage is made up of several small payments, including a portion of your loan principal, mortgage interest, mortgage insurance, property taxes and mortgage insurance when applicable. These parts combine to form what we properly call your mortgage payment, even though it’s a lot more than that.

Year after year, if you pay your payments on time and nothing drastically raises your taxes or insurance, your payment stays basically the same, but the principal you’re paying increases. For example, if you’ve just closed a $200,000, 30 year fixed rate mortgage at 4.00 percent interest, the principal and interest portion of the payment will total $954.83, but only $288.16 of that is actually helping to knock down your giant mortgage balance. If you make all your payments on time, just five years later your principal portion of that same $954.83 P&I payment is up to $351.85 and the interest is down to $602.98.

And so it goes, until you’re finally paying more principal than interest in each payment and your mortgage magically starts to shrink right before your eyes. Unfortunately, that point is roughly 20 years into your mortgage! Because of the way mortgages are structured, you pay more of the interest up front and more principal toward the end of your loan, which makes it hard to get out from under other payment-bulking items like mortgage insurance. Maybe paying a little extra isn’t such a bad idea after all.

YearPrincipalInterestPrincipal Balance
1$288.16$666.67$199,711.84
5$351.85$602.98$180,543.18
10$429.60$525.23$157,138.31
15$524.55$430.29$128,561.05
20$640.47$314.36$93,668.32

Principal and interest parts of mortgage payment on $200,000 30-year fixed rate loan with 4.00% interest rate

Video

Mr Cooper Mortgage Customer Service

The customer service phone number for mortgage, as you already know, is 1-888-480-2432. This phone number is available Monday through Thursday between 8:00 am and 8:00 pm CST, and Friday between 8:00 am and 6:00 pm CST. This customer service could be more helpful if you are late payment in any month.

You can also ask Mr Cooper mortgage department to know grace period payment without penalties. Usually this grace period should be 15 to 30 days. You can talk to a customer service representative for more information about your loan and also for services, such as requesting a payoff quote.

The mailing address for general correspondence is as follows.

Mr Cooper 8950 Cypress Waters Boulevard Coppell, TX 75019

Third Party Payment Plans

 There is absolutely no reason to pay a fee for a There are what is called intermediary companies that can set up bi-weekly mortgage payments for the homeowner. The homeowner’s checking account is debited every other week for the bi-weekly amount, and then the homeowner can send a regular monthly payment to the lender once per year. These intermediary companies will charge a fee to make that extra payment and the fee can be rather large.

There is absolutely no reason to pay a fee for a task that a person can perform on their own using the “do-it-yourself” method that was explained earlier. If the intermediary becomes bankrupt and doesn’t make the payments, the lender will not care if it wasn’t t the homeowner’s fault. It is the homeowner’s responsibility to make payments on time, even if a third party is the one making them for the homeowner.

No matter how the homeowner does it, making extra payments each year can significantly reduce the amount of interest that the homeowner will pay on their home loan.

It is a great idea to take a little time to play with the numbers by using online calculators to check how much will be saved by making bi-weekly payments.

Popular Myths

Customers who are knowledgeable should understand what a bi-weekly mortgage program can and cannot do for them. Here are two of the most common misunderstandings:

  • Paying a mortgage twice per month will improve the homeowner’s credit. This isn’t really true. Banks use an automatic bank draft for bi-weekly plans, which means all mortgage payments will be on time. However, the homeowner can achieve the same effect on a monthly plan by utilizing electronic bill payment or an automatic bank draft.
  • Paying twice every month reduces the compound interest of the mortgage. Even when paying bi-weekly, there is a good chance that the homeowner’s loan servicing institution is paying the loan monthly. This means that if the homeowner buys into a bi-weekly plan, they are actually loaning the servicing company 50% of the mortgage payment for at least two weeks each month—interest free.

Homeowners May Want to Refinance While Rates Are Low

The Federal Reserve has hinted they are likely to taper their bond buying program later this year. Lock in today’s low rates and save on your loan.

Are you paying too much for your mortgage?

FAQ

How much can I save by choosing a 20-year mortgage bi-weekly payments?

Let’s say you want to take a $200,000 mortgage with 3 percent interest.

By paying $554,60 bi-weekly instead of $1.109,20 monthly, you can save $7.509,82 and fully pay off your mortgage in 18 years instead of 20 years.

Should You Make Biweekly Mortgage Payments?

Well that depends on how fast you want to pay off your mortgage! We assume you’re down with being completely debt-free as fast as possible. In that case, you’re on the lookout for every extra advantage you can find to make that happen.



Use the mortgage payoff calculator and see how f

Biweekly payments work really well for some people—especially people who get paid on that rhythm. After all, how convenient would it be to have the same number of annual payments as paychecks?

Those who like them appreciate the way you can almost sneak in that extra annual payment without much pain. Think about it this way. Which is easier—scheduling 26 payments of X amount paid biweekly throughout the year? Or paying double that amount the first 11 months of the year, and four times that amount in December? Using the example of $1,600 a month—which is what the U.S. Census Bureau reports as the median mortgage payment—let’s chart the differences.1

Biweekly

Monthly

Monthly + an extra payment at year’s end

Total number of annual payments

26

12

13

Total amount paid on mortgage all year

$20,800

$19,200

$20,800

Payment amount

$800

$1,600

$1,600

How it feels

Easy

Normal

Hard (you have to cough up a double payment in a single month)

The biweekly system makes a lot of sense! It gives you the same overall speed boost you’d get from doubling up your end-of-the-year payment, without the pain of actually forking over double the cash at one time. You’re basically spreading that extra payment across the year and getting into the habit of sending above the minimum payment every two weeks.

Dont Let Biweekly Payments Slow Down Your Debt-Free Progress

Biweekly payments are no substitute for gazelle intensity. As soon as you hit Baby Step 5, it’s time for you to start sending as much as you can toward getting rid of that mortgage forever! If biweekly payments help you make that happen faster, so be it! Just don’t confuse “set-it-and-forget-it” with focused intensity. Forcing yourself to send one extra monthly payment a year is one step you can take in the right direction—but it’s not an excuse to keep the mortgage around any longer than you have to.

Does a bi-weekly mortgage work as advertised?

Biweekly mortgage repayment schemes to allow you to own your home faster. It, like other methods of accelerating your mortgage repayment, do in fact pay your balance down more quickly and save you interest costs.

Whether the bi-weekly mortgage is the most effective strategy depends on if the loan servicer charges more to process your payments this way, and if there is a mortgage refinance available that could do a better job of saving you time and money.

Understanding your options is the first way to make sure you’re making a good choice. Read more about bi-weekly mortgages below.

Test Drive The Course – FREE! Get 5 Sample Lessons Immediately

  • No cost or obligation.
  • No hooks or gimmicks.
  • The goal is to let you experience the quality for yourself.
  • I just need your email address to send them to you.
  • You can unsubscribe anytime.
Yes! Send me 5 sample lessons

No cost or obligation. Quit any time. The only way you lose is by not trying.

How to Make Bi-Weekly Payments on Your Own

Does your mortgage lender allow bi-weekly payments?

If so, think twice before committing to this payment schedule. 

Remember:

It’s a permanent arrangement.

So your lender will expect a payment every other week regardless of any changes to your financial situation. 

To be on the safe side, it might be better to commit to a regular monthly payment. And then make bi-weekly payments on your own.

Here’s how to do this:

1. Pay a little more toward your mortgage each month

Does your lender accept partial payments? If so, you can pay half of your mortgage payment every other week.

Then again, maybe your lender doesn’t accept partial payments.

If not, divide your mortgage payment by 12, and then add this much to each monthly payment.

So if you have a monthly mortgage payment of $1,200, add an extra $100 to your payment each month for a total payment of $1,300.

At the end of the year, you would have made the equivalent of one extra mortgage payment. 

For this to work, though, the extra $100 payment must be a principal-only payment.

If you pay your mortgage by check, send two separate checks.

  1. The first check should be for your normal mortgage payment, indicated in the memo section.
  2. The second check should be for the extra payment. On this check, write “principal-only” in the memo section.

If you don’t indicate principal-only, your mortgage lender may apply the extra payment to the principal and interest due.

If you make your mortgage payment online, the payment form may include an option to make an extra principal payment.

2. Make an extra principal payment each year

Another option is to make one extra principal-only payment each year.

You can do this when you get a work bonus, a tax refund, or make the extra payment on your mortgage anniversary.

Again:

Send a separate check notifying your lender to apply the additional payment to the principal balance.

3. Apply extra paychecks to your principal

If you’re paid every other week, take advantage of months where you’ll receive three paychecks.

This happens about two times a year.

Take that extra paycheck and make an extra principal payment.

Depending on how much disposable income you have, don’t stop with one extra payment a year.

Maybe you can make two extra mortgage payments a year and reduce your mortgage term even further.

Share it with your friends:

VIEW

Mr. Cooper, also known as Nationstar Mortgage, is facing a class action lawsuit lodged by a North Carolina resident for allegedly making several unauthorized withdrawals from her bank account and failing to adequately investigate or fix the issue. … Read More

Pros

Many people select a 30-year mortgage because it comes with an affordable loan payment.

But if given a choice, they might prefer to pay off their mortgage sooner. 

Choosing a bi-weekly payment schedule offers the best of both worlds.

When you reduce your principal balance sooner, you’ll not only pay off your house quicker. You’ll also build equity faster.

A home with substantial equity opens the door to home equity loans or home equity lines of credit in the future. Equity solutions can help finance home improvement projects and increase your property’s value. 

Also, building equity faster can protect your property from negative equity. This can happen when home values decline.

One of the biggest benefits of paying down your balance sooner is the opportunity to drop private mortgage insurance quicker.

Private mortgage insurance, or PMI, is an added expense when you purchase a home with less than a 20 percent down payment. It’s paid monthly with your mortgage payment. 

If you have a conventional home loan, many lenders will drop PMI once you have 20 percent to 22 percent equity in your home.

The Benefits of Bi-weekly Payments

Bi-weekly payments (the accelerated kind) offer numerous benefits.

In the first place, a bi-weekly payment plan allows for better cash flow matching, as you can adjust your mortgage payments to your income stream. For example, many people receive a paycheque bi-weekly, which conveniently aligns with bi-weekly mortgage payments. Optimizing your cash flow management this way means you’re less likely to experience cash shortfalls. You don’t have to fear the sting of one huge mortgage payment at the end of the month, especially if you find yourself strapped for cash.

As previously alluded to, bi-weekly payments can help you tackle crippling interest costs and put your mortgage to rest sooner.

The financial benefits of bi-weekly payments are best understood when analyzed side-by-side with monthly payments. Assume you’re about to acquire a $360,000 mortgage with a 25-year amortization period at an interest rate of 3%. Here’s how your mortgage would play out under monthly and bi-weekly payment scenarios:

Monthly Payment Schedule Bi-weekly Payment Schedule
Payment Amount $1,703.68 $851.84
Total amount paid each year $20,444.16 $10,222.18
Total interest paid $151,106 $132,540
Total cost of mortgage $511,106 $492,540
Time to pay off mortgage 25 years 22 years and 4 months

As you can see, if you opt for bi-weekly payments, you’ll end up saving $18,566 in interest over the life of the mortgage. You’ll also pay off the entire principal two years and eight months early.

Another benefit of bi-weekly payments is that you can build equity in your home more rapidly, thereby increasing your net worth. More equity ensures that you’ll keep a little bit of extra money in your wallet should you decide to sell your home. Also, if you’re keen on financing a major expenditure, such as a home renovation, you can leverage your home equity by taking out a home equity line of credit (HELOC). 

How To Set Up Bi-Weekly Payments

Once you’ve determined biweekly payments (and/or extra payments) are right for you, it’s time to set it up and start saving!

Many banks and mortgage companies will allow you to reconfigure your existing mortgage into a biweekly payment plan. You’ll need to call and ask because they typically don’t advertise this feature.

Alternatively, you can simply split your own mortgage payment in half, and pay that amount every two weeks. The end result will be the same, but you won’t have the ease of automation you might desire. However, verify with your bank first that this will still satisfy your payment terms and not cause a prepayment penalty or other problems.

If you choose to add extra principal to your required payments, you may have to check with your mortgage holder to find out if anything is required so that the extra money goes directly to principal instead of simply prepaying required payments.

Paying Extra Principal on Tighter Budgets

A few of you, maybe more than a few, may be working with much tighter budgets that don’t allow for a Frappacino every day during the workweek. Just because you don’t have a place to readily find that weekly $20 we were talking about doesn’t mean you can’t pay any extra on your mortgage, though. If you check your monthly payment stub, or look at your account online, you’ll see that you’ve always got the option to pay extra principal on your mortgage. What you have to add may not be a lot, but every little bit chips away at your obligation.

Let’s say you just round your $954.83 payment up every month by adding a wee $5.17 to make a grand total payment of $960. You probably can swing that $5.16, and believe it or not, it will matter. Let me show you just how much.

YearPrincipalInterestPrincipal Balance
1$293.34$666.67$199,706.67
5$358.16$601.84$180,194.15
10$437.31$522.69$156,369.43
15$533.96$426.04$127,279.52
20$651.96$308.04$91,760.89
25$796.04$163.96$48,392.72

Effects of rounding up payment by $5.16 on a $200,000 30-year fixed rate loan with 4.00% interest rate

By simply adding an extra $5.16 to your principal payment each and every month, you’ve shaved three months off your loan. Well, that’s just incredible! Five measly bucks that won’t hardly even buy enough gas to get across town just made you mortgage-free 90 days sooner! Just for fun, let’s see what would happen if you rounded your payment up to $1,000. That’s $45.16 each month, still a lot less than $20 a week.

YearPrincipalInterestPrincipal Balance
1$333.33$666.67$199,666.67
5$407.00$593.00$177,493.32
10$496.94$503.06$150,419.78
15$606.77$393.23$117,363.09
20$740.86$259.14$77,000.95
25$904.59$95.41$27,718.94

Effects of rounding up payment $45.16 on a $200,000 30-year fixed rate loan with 4.00% interest rate

Forty dollars extra each month can make a big difference, you’ll even have this note paid off about 27 1/2 years into it, saving a whopping 2 1/2 years of payments!

What are today’s mortgage rates?

There is no reason that you can’t combine the savings of a refinance with the accelerated repayment of a bi-weekly repayment plan. Check out today’s rates and see what your options are.

Tags