This totals out to 26 half payments per year-or 13 monthly payments-versus 12 monthly payments using the default repayment schedule.įor example, if you choose to make biweekly payments of $500 instead of the standard $1,000 monthly payment, you’ll end up paying $13,000 every 12 months instead of $12,000.
In some months, you’ll only pay the equivalent of a full monthly payment but make an extra half payment during longer months. Instead of making a full monthly payment, you make half payments every two weeks. Biweekly mortgage payments are budget-friendly and make the equivalent of an extra monthly payment each year without significantly increasing your out-of-pocket costs. Biweekly Mortgage PaymentsĪ single monthly payment for the life of the loan is the default repayment frequency for most borrowers. Any additional payments you make are more effective when they’re applied earlier in the repayment term when your monthly interest charges are higher. The best option depends on how much extra you’re willing to put toward the loan and how quickly you want to pay off your home loan. There are multiple repayment strategies for owning your home outright sooner. Be sure to check with your lender to verify there are no prepayment penalties. This is the amount you’ll apply to your loan principal. Decide how much your extra payment amount will be. You can increase your extra payment amount or frequency as your finances improve. Decide between making monthly contributions or a single lump sum payment. This is different from your annual percentage rate (APR), which includes additional loan expenses, like mortgage insurance and discount points. List your current mortgage interest rate. The most common mortgage terms are 15 years and 30 years. Enter the number of years of your purchase loan. If you’re refinancing or already making repayments, include your minimum monthly mortgage payment, excluding taxes and insurance. Monthly interest and principal payments.If you’re refinancing or already making repayments, list the outstanding mortgage principal that needs to be repaid. This calculator won’t factor in private mortgage insurance or similar premiums. With a purchase loan, input your down payment amount as a percentage. If you have a purchase loan, input the price you paid for the home. Choose “refinance” if you’re getting a mortgage refinance or keeping your current loan. Choose “purchase” if you plan on buying a home and making extra payments immediately. Is it worth almost $1,000 more to have it now (furthermore, the retail price in 3 years will probably drop)? That is like going into a store that advertised "SALE-ADD 20% TO EVERY PURCHASE.How To Use the Additional Payment Calculatorīelow is a detailed summary of how to enter the appropriate loan information for a new or existing mortgage: If purchased on a credit card with a 12% annual percentage rate (APR) compounded daily, and with minimum monthly payments of $166 paid over three years, it winds up costing over $5,980. Here is an example: a new television flat-screen HDTV model retails for $5,000. If one calculated the true cost of goods bought on credit, one would have second thoughts about making the purchase in the first place. Many impulse purchases are made on credit with little thought given to how the debt will be repaid in the future. One should never use credit to purchase things for which one will not be able to pay in the future. Credit abuse increases the cost of credit to everyone. Goods and services are provided on credit with the expectation that they will be paid for with money in the future. Credit is extended with the faith that borrowers will repay the debt. While credit is very important to the economy, its abuse is harmful. The marketing is so aggressive that consumers may lose sight of the fact that this is not free money and make excessive purchases to the point where they find themselves in financial difficulty. This is why credit card companies aggressively compete to get you to use their credit cards and services. This represents hundreds of billions of dollars in interest earnings to lenders. According to the Federal Reserve, there was more than $2.5 trillion of consumer debt outstanding by late 2009-this is more than double the amount outstanding in 1994. Credit is issued by banks, savings and loans, credit unions, public utilities, and even merchants. Today, credit has become a business in its own right. One should not use credit in place of money when there is little or no likelihood that payment in real money will be made-using credit without the intent or ability to pay is theft.
Derived from the Latin word for "trustworthiness," credit is based on faith that the borrower will repay the debt with real money. While credit stimulates the economy, it does have to be used judiciously.