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Thrifty Tips - Be careful of Biweekly Mortgage Payments.
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Tuesday, March 1, 2016
Greetings Thrifty Friends,
Everybody knows that paying half your mortgage every two weeks saves you lots of money in interest. Or does it?
It depends on who you're giving your money to.
Keep pinchin' those pennies,
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TODAY'S THRIFTY TIP:
Does your lender actually service your loan?
If it is a third party that handles these payments you might be under the impression that your balance is reducing every two weeks, but the 3rd party service could be debiting your account every 2 weeks and then sitting on your money AND making interest. At the end of each 2 week debit period they now have a full payment and apply that to your lender. It may not be ethical, but it is legal and it does happen.
Biweekly mortgage payments are a good idea only if the principle is actually coming down with every extra payment. So if you want to switch to a biweekly payment schedule MAKE SURE every check is going toward your mortgage balance.
And remember, even if you cannot make biweekly payments you can still reduce your principle by paying extra each month and indicating "apply to principal" on each payment.
Even an additional $20 or $50 will further reduce your interest and pay off your loan faster, and it doesn't cost you one cent in fees or servicing!
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