One simple method for prepaying a mortgage loan is by utilizing "bi-weekly mortgage payments". Using this method essentially makes 13 mortgage payments in a 12 month time frame. The 13th payment is applied only to the principal portion of the loan balance.
This method of prepaying a mortgage may substantially step up the payment of the loan principal. Paying off the loan principal early will save monies by reducing the amount of interest paid on the loan. For example, the bi-weekly mortgage payment process can pay off a 30 year loan in approximately 19 years.
Bi-weekly payments can be handled 1 of 2 ways:
- Pay half of the monthly mortgage payment every 2 weeks, rather than the full balance once a month. (Since most mortgage companies only provide payment coupons for one payment a month, you should be certain to reference your loan number on the check.)
- Add an amount equal to 1/12 the monthly mortgage payment to each monthly payment.
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