An interesting conventional payment alternative is making two half payments each month. If your pay period is every two weeks, there are programs where you can pay half the payment on the first and the other half on the fifteenth of the month. Most lenders that offer this option require an automatic deduction on your checking account. For example, Wes and Lynne went with this option when they bought their townhouse and financed $275,000. Since both their paychecks were direct deposit and bimonthly, they felt that this was a way they could put their mortgage payments on autopilot, save interest, and shorten their loan, too.
For Wes and Lynne, this is how it worked. Monthly principal and interest payment was $1,693.22. One half, $846.61, was taken out on the 5th of month and the balance $846.61 on the 25th. In effect, they were making two extra payments per year with this system. This would result in paying off a 30-year loan in 24.35 years and saving $74,329 in interest.
Fannie Mae and Freddie Mac, as well as many other investors, have bimonthly payment programs available. Although not as popular as standard fixed and variable mortgages, the bimonthly programs can be a great way to go. The key question is, can you consistently have the funds in your account those two times a month the bank deducts them?
For Wes and Lynne, this is how it worked. Monthly principal and interest payment was $1,693.22. One half, $846.61, was taken out on the 5th of month and the balance $846.61 on the 25th. In effect, they were making two extra payments per year with this system. This would result in paying off a 30-year loan in 24.35 years and saving $74,329 in interest.
Fannie Mae and Freddie Mac, as well as many other investors, have bimonthly payment programs available. Although not as popular as standard fixed and variable mortgages, the bimonthly programs can be a great way to go. The key question is, can you consistently have the funds in your account those two times a month the bank deducts them?
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