Payment on a Bi-Weekly scheme for early mortgage pay-off has been the Palm State Mortgage topic of the month.
This week brings you Part 2 concerning 13 month mortgage payment program offered by some banks and companies.
You might want to refer back to that article which began with the basics of a regular 12 month style payment plan.
Back To Basics:
First, let’s review a few basic points about regular, 12 month, once-a-month mortgage paying plans:
1. Most pe
ople know the fact that every “mortgage payment is split into two parts — a principal portion and an interest portion.”
Of course, the principal portion is applied to the amount that you owe the bank. Bit by bit, your remaining loan balance will grow smaller with time.
2. On the other hand, the interest part of your payment goes to the cost of borrowing from the bank.
3. In the early life of your loan, “a significant portion of your payment is comprised of interest and just a small part goes to paying down your balance.”
4. Later, as your loan begins to approach final installments, your payment is portioned so that the larger part goes to the balance.
The 13th Payment –Seriously? Not a New Idea!
Palm State Mortgage wants you to feel secure about your mortgage payment plan.
After five years of steady payment, you realize, your loan balance has been hardly moved. The technical term you need to know is “amortization.” This is defined as “The length of time required to amortize the mortgage loan expressed as a number of months. For example 360 months is the amortization term for a 30-year fixed rate mortgage.”
Think of the 13 month mortgage installment program as a clever way to circumnavigate the amortization schedule.
1. So you will agree, according to this plan, you will pay one payment every two weeks, as we wrote in Part I of this series of blogs on Bi-Weekly plans.
2. This adds up to the same amount of money as if you were making 13 payments a year. However, that is not the way a mortgage really works.
3. As we stated in Part I, your interest is configured on an annual basis. Since the mysterious 13th payment must be delivered—it applies to the principle.
5. That is why, on an average, you will reduce your loan time by about four years.
Bi-Weekly: Does this Mortgage Program Work for You?
Although mathematics shows us this works, you might not really want to enroll in a bi-weekly mortgage payment plan.
One of the most obvious reasons to avoid bi-weekly mortgage payment programs is that homeowners choosing to self-manage their bi-weekly payments generally save more money than those using a bank-managed bi-weekly payment program. Why?
Let’s check the math to see what happens if you manage this idea yourself instead of allowing the bank to administer it.
Fact Set 1: Bank-managed Piggy bank with dollars banknotes. Some similar pictures from my portfolio:bi-weekly mortgage payments pays off in 26 years, 0 months
Fact Set 2: Self-managed bi-weekly mortgage payments pays off in 25 years, 11 months
Bi-Weekly Schemes and Scams: The Secret Agenda Boosted By Some Institutions
Enjoy a panorama of mortgage savings with Palm State Mortgage Company.
Did you know banks will only apply that 13th payment when the year is completed? So you could actually save up the dollars, and make your own little schedule– do it yourself, with your own little record-keeping, and then you could actually apply it 12 times per year.
Find out how and see the math at Mortgage Reports online resource.
Bi-Weekly Mortgage Schedule Fee: Warning of Possible Foul on the Play!
Meanwhile, Palm State Mortgage Company urges you to watch out for banks that might charge you extra fees for making your bi-weekly payments on your mortgage! We hate to be traditional or sound ordinary in our approach, but you might do better with a lower-rate re-fi on a simple, classic low-interest loan.
