13 Months of Interest..

[TFord7]

Browsing YouTube one day (great pass-time for those of us still double dutching our entry into the hustle of the insurance field) I ran across a video that said the mortgage companies are getting "13" months of interest per year and the way to combat it is to make two payments per month or make bi-weekly payments equivalent to the whole monthly mortgage amount... So make 26 payments a year.

My question is would paying higher than the monthly mortgage accomplish the same thing (or making "principal only" payments in addition to the normal mortgage that are not biweekly just big chunks here and there)?

 

[SportsNut]

Browsing YouTube one day (great pass-time for those of us still double dutching our entry into the hustle of the insurance field) I ran across a video that said the mortgage companies are getting "13" months of interest per year and the way to combat it is to make two payments per month or make bi-weekly payments equivalent to the whole monthly mortgage amount... So make 26 payments a year.

My question is would paying higher than the monthly mortgage accomplish the same thing (or making "principal only" payments in addition to the normal mortgage that are not biweekly just big chunks here and there)?

Yes.

i.e - Lets take a 100K mtg @ 5% int, (even though today A+ credit could get lower), amortized over 30 yrs = $ 536.82 pymt of P&I. Suppose you added $ 100 extra with each pymt, the mtg would payoff in 21 yrs, instead of 30. An extra $ 200 per mo drops the payoff date to 16.5 yrs. So there you have it, the answer is a resounding YES.

You can play around with this mtg calc here.

 

[FL P&C Broker]

Another agent that was in the auto industry before was trying to explain something like that to me. He wasn't saying to make double payments but to break up the payment within the month. If you car payment or mortgage is $500/month, pay $250 on the 1st and $250 on the 15th or something like that.

 

[TFord7]

Yep so it's basically a more streamline way of paying extra on your loan (mortgage/auto) without making the payments necessarily "higher" just making more total payments within the year