Monthly payments made bi-weekly/weekly?
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Monthly payments made bi-weekly/weekly?
| Tue, 10-19-2004 - 2:32pm |
A friend recently told me that you can seriously reduce the length of your mortgage by simply dividing the monthly payment into a biweekly payment. She said she read somewhere that by paying the same amount for the month but in two separate payments (of course the first payment would be two weeks prior to the due date) on a 30-year mortgage will mean that you will pay the loan off seven years early. Is there any truth to this? The idea she said behind it was that since the bank receives a portion of the money early, it affects your interest and more goes toward the principal faster....which kinda makes sense to me. And, if there is truth to this, wouldn't this also work for personal loans, credit cards, etc.?
I actually started making weekly payments to my three credit card companies and also to the bank for a personal loan and auto loan.....I had done this before I had heard this about biweekly mortgage payments because I am finding it easier to budget if I take out a weekly portion of each payment and pay each pay day (I get paid every Friday).
Any thoughts or ideas which would be greatly appreciated! I have an enormous amount of debt that I'm trying to pay off as quickly and efficiently as possible...
TIA!

And it just goes to show you that my ex was lying when he said he didn't have enough for the mortgage payment but had paid 1/2, and because it wasn't the full payment they rejected it and sent his check back, causing the mortgage to be even more behind. He had hidden the delinquency from me because he was embarrased, and I only found out when I checked my credit after a job interview had gone well, because I knew that was the next step for them... and found we had been 90 days delinquent TWICE in the past year (this was almost 2 years ago). Had he told me we could have taken a 401(k) loan and made the payment. Instead he let us go deliqnuent and damage both our credit ratings. We're divorced now (this was not the only reason).
~Dawn
edited to correct: that would be 1 extra mortgage payment at years end, not 2...sorry
Edited 10/20/2004 8:14 pm ET ET by shiningonme
Yes - it can save you some money.