Homeowners may be surprised at the savings that can result.
- Many homeowners have a large mortgage.
- Paying your mortgage once per month is common.
- Switching to a biweekly payment schedule could help them save money.
A mortgage is the most expensive kind of debt most people take on over the course of their lives. In fact, many people borrow hundreds of thousands of dollars when buying a home and they take decades to pay off that debt.
But there’s a simple and easy way to make paying off a loan cheaper and quicker. Trying this trick could come with substantial savings without making changes to your lifestyle.
Here’s how you can lower the cost of your mortgage loan
If you want to reduce the cost of borrowing, one of the simplest and most effective ways to do this is to change the way you pay your mortgage.
Most people pay their loans once per month. But, you could instead opt to divide your monthly payment in two and pay it biweekly. This approach could make a lot of sense since most people get paid biweekly. You could make half of your mortgage payment out of each paycheck.
Now, you may be wondering why this would help you. The reason is simple: If you pay biweekly, there are typically two months in the year when there are five weeks and you end up getting an “extra” paycheck if you receive your salary every other week.
That means if you’re paying half of your mortgage payment out of each paycheck, you will end up making one full extra payment during the year — likely without even noticing you’re doing so. This extra payment could reduce your balance since it can go entirely toward paying down what you owe. And it can make a big difference.
Say, for example, you purchased a median-price home, which would mean buying a $416,000 house if you bought in June 2022. If you put down 20% and borrowed the remaining 80%, you’d be taking out a $333,600 mortgage. If your interest rate was 5.5% and you had 30 years remaining on your loan, you would end up saving a whopping $69,227.82 by paying biweekly. You would also pay off your loan around 5.1 years ahead of schedule.
Should you try this technique?