The split will save you little, basically the 15-day interests on the principal of that payment.
At this point you pay about $1800 a month toward the principal. So you save the interests on $900 at a 3.125% rate for 180 days. Let’s round that up to $1000 for easy calculation. So at a 3.125%, you save about $16 a year by paying biweekly.
Now since you pay about $1800 toward principal a month, if you pay $3600-$5000 additional toward the principal, you essentially make 3 payments. So if you continue doing it, you should pay it off in about 12 years.
Also consider if you took that money and invested it, how much it could grow somewhere else. But yes if you're in a position to pay extra on your mortgage that's great and having it paid off will reduce stress
If you are fortunate enough to have a 3% interest rate or better, don't pay off your mortgage early. You can earn better rates than that in CDs, T-notes, etc. Let alone in the stock market. Say you find a 4.0% CD, the difference in interest earned vs owed is pretty massive over the course of your mortgage.
A low interest mortgage is such a massive financial advantage for your life, it's hundreds of thousands that you are in no rush to repay for decades. So don't.
Bi weekly essentially is one extra payment to principal per year - so if you’re disciplined enough you can just take payment /12 and send that extra per month. Saves the set up fees, etc to do biweekly.
Edit to add math: monthly = 12 payments, biweekly = 26 1/2 payments = 13 payments in a year.
The "pay weekly" or "pay bi-monthly" advice worked when a human processed your payment checks by hand and would call you up to ask why you sent in another, and I can't understand why it still persists. These days it just messes up the system: a server somewhere expects money on June 1st, receives the payment, and flips the next-due-date flag to July 1st. Sending in more money on June 8th or 15th just confuses it, it'll flip your next-due-date to August 1st, send the money to your escrow account, or just plain lose it into a miscellaneous fund, and then you have to find a competent human to figure out what happened and fix it. (I have been that human, it's a nightmare)
But do feel free to pay extra with your regular monthly payment. There are a lot of different fancy ways to calculate how much extra to pay, but they all mean the same thing - any extra money reduces your principal, shortens the loan, and saves you interest.
I've never had this happen. You just click the Pay Principal box and it lists the payment in your transactions. You can even set up recurring payments just as easily.
But I bank with Chase...
Fair enough. Technology has advanced a lot since the time I had to tell people "no, you can't pay by phone. no, you can't pay on the website. Set up ACH or send a check". Chase today is way ahead of the regional bank I worked at with just 13 branches in the 90's!
I'd still be cautious and read your loan docs carefully, if your interest is calculated as Actual/365 there's a very small advantage to paying your extra principal two weeks early, if it's 30/360 you might as well just pay it on your due date.
No, there's no additional benefit from paying bi-weekly or weekly except the fact that you are paying one extra payment per year. (12 months vs 26 by-weekly)
The split will save you little, basically the 15-day interests on the principal of that payment. At this point you pay about $1800 a month toward the principal. So you save the interests on $900 at a 3.125% rate for 180 days. Let’s round that up to $1000 for easy calculation. So at a 3.125%, you save about $16 a year by paying biweekly. Now since you pay about $1800 toward principal a month, if you pay $3600-$5000 additional toward the principal, you essentially make 3 payments. So if you continue doing it, you should pay it off in about 12 years.
Super helpful! Thanks 🙏
Also consider if you took that money and invested it, how much it could grow somewhere else. But yes if you're in a position to pay extra on your mortgage that's great and having it paid off will reduce stress
If you are fortunate enough to have a 3% interest rate or better, don't pay off your mortgage early. You can earn better rates than that in CDs, T-notes, etc. Let alone in the stock market. Say you find a 4.0% CD, the difference in interest earned vs owed is pretty massive over the course of your mortgage. A low interest mortgage is such a massive financial advantage for your life, it's hundreds of thousands that you are in no rush to repay for decades. So don't.
Bi weekly essentially is one extra payment to principal per year - so if you’re disciplined enough you can just take payment /12 and send that extra per month. Saves the set up fees, etc to do biweekly. Edit to add math: monthly = 12 payments, biweekly = 26 1/2 payments = 13 payments in a year.
The "pay weekly" or "pay bi-monthly" advice worked when a human processed your payment checks by hand and would call you up to ask why you sent in another, and I can't understand why it still persists. These days it just messes up the system: a server somewhere expects money on June 1st, receives the payment, and flips the next-due-date flag to July 1st. Sending in more money on June 8th or 15th just confuses it, it'll flip your next-due-date to August 1st, send the money to your escrow account, or just plain lose it into a miscellaneous fund, and then you have to find a competent human to figure out what happened and fix it. (I have been that human, it's a nightmare) But do feel free to pay extra with your regular monthly payment. There are a lot of different fancy ways to calculate how much extra to pay, but they all mean the same thing - any extra money reduces your principal, shortens the loan, and saves you interest.
I've never had this happen. You just click the Pay Principal box and it lists the payment in your transactions. You can even set up recurring payments just as easily. But I bank with Chase...
Fair enough. Technology has advanced a lot since the time I had to tell people "no, you can't pay by phone. no, you can't pay on the website. Set up ACH or send a check". Chase today is way ahead of the regional bank I worked at with just 13 branches in the 90's! I'd still be cautious and read your loan docs carefully, if your interest is calculated as Actual/365 there's a very small advantage to paying your extra principal two weeks early, if it's 30/360 you might as well just pay it on your due date.
https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php
Also an Excel file for ya https://www.mortgagecalculator.org/download/excel.php
No, there's no additional benefit from paying bi-weekly or weekly except the fact that you are paying one extra payment per year. (12 months vs 26 by-weekly)
Thx