This week, let’s talk about mortgage payments. There are varying types of mortgage payments available today. You can choose between fixed or variable interest rates, 15 or 30 year long term mortgages, or variable adjustable rate mortgages (ARMs). ARMs come with a fixed interest rate for a short amount of time 7, 5, 3, or 1 years. If you can, I highly encourage everyone to take advantage of the low interest rates available now because in a few years, I predict the rates are going to go up considerably.
So, you have a mortgage. 99.9% of us pay it once a month. Wouldn’t it be great to knock some years off of your mortgage? Most mortgage companies offer a bi-weekly payment option for a fee. Because there are 52 weeks in a year, if you make bi-weekly payments, you will be making one extra mortgage payment a year. After doing some quick math, the fee the isn’t worth it.
There is, however, a way to do it for free. Almost all mortgage companies allow you to pay extra on your mortgage every month. This extra payment would be applied directly to your principal. If you take your monthly mortgage amount and divide it by 12, you come up with an amount that will be equivalent to making an extra mortgage payment a year. There is no fee involved. If you want to go down this path, talk to your mortgage company first and let them know that you will be sending in extra money every month and it is to be applied only to the principal owed. Also, make sure that there aren’t any pre-payment penalties involved with your mortgage. If there are penalties, then you are stuck.
This is a pretty easy way to knock down your mortgage without investing a lot of extra money every month.
Also, I am soliciting you for topics. Is there a certain financial topic you want to know more about but don’t have the time to do the research? Let me know. I’ll do the research and blog about the results.
