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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Mortgages
- Q & A Q: What about splitting my mortgage in two and paying biweekly?
A: Some people set on paying off their home loan early
and reducing interest charges opt for a biweekly mortgage. Monthly
payments are divided in half, payable every two weeks. Because there are 52 weeks in a year, the program results
in 26 half-payments, or the equivalent of 13 monthly payments
per year instead of 12. Using the biweekly payment system, a
homeowner with a $70,000, 30-year biweekly mortgage at 10 percent
interest could save $60,000 in interest and pay off the balance
in less than 21 years. Q: What are the benefits of prepaying the mortgage?
A: By making additional payments that go toward the
principal balance, you can save thousands of dollars and shave
years off the length of your loan. Principal payments over and above the minimum monthly amount
required by the terms of the mortgage constitute partial prepayment
of a mortgage. Each mortgage will have terms describing how
and when prepayment may occur. Refer to the note to see if there
is any penalty incurred for prepayment. The total savings potential also depends on how long you want
to stay in the house. Borrowers who plan to move in the near
future should not expect to realize as significant a savings
as people who pay ahead of schedule until they own the home
free and clear. Check with your lender, who should be able to provide specific
answers as to how such a prepayment plan will shorten the life
of the loan and what kind of interest savings can be expected. |