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徐天媺 May Xu
新泽西州华人贷款专员 New Jersey Chinese Loan Officer
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THE BI-WEEKLY MORTGAGE - WHO NEEDS IT?
The Basics:
Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments.
You save money. To achieve these wonderful savings all you have to do is allow half of your mortgage payment to be deducted from your checking account every two weeks. It’s easy. Of course, there is a small "set-up fee" and usually a "transaction fee" with every automatic deduction.
How it Actually Works:
You cannot simply mail in half a payment every two weeks to your mortgage lender. Since they do not accept partial payments for legal and accounting reasons, the mortgage company would just mail your half-payment back to you.
Instead, the bi-weekly mortgage company is an intermediary between you and your mortgage lender. They automatically debit your checking account every two weeks for half of your mortgage payment, then place your funds into a trust account. Basically, this is just a holding account for your money. In another two weeks, there is another automatic deduction from your checking account, and so on. When your mortgage payment is due, your funds are withdrawn from the trust account and forwarded to your mortgage lender.
Since you are placing funds into the trust account faster than your mortgage payments are due, you eventually accumulate enough money to make an "extra" payment. The way the cycle works, this occurs once a year. The extra payment is applied directly to your principal balance, which causes your loan to amortize faster, pay off more quickly and save you thousands of dollars.
Cost of the Bi-Weekly Mortgage
There is usually a set-up fee that runs between $195 and $350, depending on how much sales commission is paid to the individual or company setting up the account for you. You also pay a transaction fee each time there is an automatic deduction from your checking account and sometimes also when the payment is made to your mortgage lender. There may also be a periodic "maintenance fee."Meanwhile, whoever controls the trust account is earning interest on your money.
Savings of the Bi-Weekly Mortgage
By making principal reductions using the bi-weekly mortgage program, your mortgage will amortize more quickly, saving you money. How quickly your loan pays off depends on your interest rate and when you begin making the bi-weekly payments.
On a $100,000 loan at today’s interest rate of eight percent, your first principal reduction would probably be a year from now. Assuming the principal reduction is equal to one monthly payment ($733.76), you would save $43,852 over the life of the loan and pay it off almost seven years early.
However, you have to deduct from those savings any amounts you paid in set-up, transaction, and maintenance fees.
No-Cost Alternatives to the Bi-Weekly Mortgage
Instead of hiring a company to manage your bi-weekly payment, you could accomplish essentially the same thing on your own for free. Just take your monthly payment, divide it by twelve, and add that amount to your monthly mortgage payment. Be sure to earmark it as a principal reduction.
The first way you save is that you do not have to pay any fees to anyone. It’s free.
In addition to not paying fees -- using the same example as above -- your total savings on the mortgage would be $45,904. Plus the loan would be paid off three months quicker than with the bi-weekly mortgage. The reason yousave more is because you are making a principal reduction each month, instead of waiting for funds to accumulate so that you can make one principal reduction a year.
Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments.
You save money. To achieve these wonderful savings all you have to do is allow half of your mortgage payment to be deducted from your checking account every two weeks. It’s easy. Of course, there is a small "set-up fee" and usually a "transaction fee" with every automatic deduction.
How it Actually Works:
You cannot simply mail in half a payment every two weeks to your mortgage lender. Since they do not accept partial payments for legal and accounting reasons, the mortgage company would just mail your half-payment back to you.
Instead, the bi-weekly mortgage company is an intermediary between you and your mortgage lender. They automatically debit your checking account every two weeks for half of your mortgage payment, then place your funds into a trust account. Basically, this is just a holding account for your money. In another two weeks, there is another automatic deduction from your checking account, and so on. When your mortgage payment is due, your funds are withdrawn from the trust account and forwarded to your mortgage lender.
Since you are placing funds into the trust account faster than your mortgage payments are due, you eventually accumulate enough money to make an "extra" payment. The way the cycle works, this occurs once a year. The extra payment is applied directly to your principal balance, which causes your loan to amortize faster, pay off more quickly and save you thousands of dollars.
Cost of the Bi-Weekly Mortgage
There is usually a set-up fee that runs between $195 and $350, depending on how much sales commission is paid to the individual or company setting up the account for you. You also pay a transaction fee each time there is an automatic deduction from your checking account and sometimes also when the payment is made to your mortgage lender. There may also be a periodic "maintenance fee."Meanwhile, whoever controls the trust account is earning interest on your money.
Savings of the Bi-Weekly Mortgage
By making principal reductions using the bi-weekly mortgage program, your mortgage will amortize more quickly, saving you money. How quickly your loan pays off depends on your interest rate and when you begin making the bi-weekly payments.
On a $100,000 loan at today’s interest rate of eight percent, your first principal reduction would probably be a year from now. Assuming the principal reduction is equal to one monthly payment ($733.76), you would save $43,852 over the life of the loan and pay it off almost seven years early.
However, you have to deduct from those savings any amounts you paid in set-up, transaction, and maintenance fees.
No-Cost Alternatives to the Bi-Weekly Mortgage
Instead of hiring a company to manage your bi-weekly payment, you could accomplish essentially the same thing on your own for free. Just take your monthly payment, divide it by twelve, and add that amount to your monthly mortgage payment. Be sure to earmark it as a principal reduction.
The first way you save is that you do not have to pay any fees to anyone. It’s free.
In addition to not paying fees -- using the same example as above -- your total savings on the mortgage would be $45,904. Plus the loan would be paid off three months quicker than with the bi-weekly mortgage. The reason yousave more is because you are making a principal reduction each month, instead of waiting for funds to accumulate so that you can make one principal reduction a year.
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Why close at the end of the Month?
Mostly, this has to do with lowering your out of pocket costs by minimizing the amount of "prepaid interest" you pay on your mortgage at closing.
Interest on your mortgage begins running from the date your transaction closes, but most loans are due on the first day of the month. So when you close, you "pre-pay" the interest between the closing date and the end of the month. 阅读全文
Mostly, this has to do with lowering your out of pocket costs by minimizing the amount of "prepaid interest" you pay on your mortgage at closing.
Interest on your mortgage begins running from the date your transaction closes, but most loans are due on the first day of the month. So when you close, you "pre-pay" the interest between the closing date and the end of the month. 阅读全文
The Complete Guide to ARM Loans - 3, 5, 7 & 10 Year
What Is an ARM? An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts annually thereafter for the remaining time period for a total of 30 years. After the set time period your interest rate will change and so will your monthly payment. The monthly payment amount is usually subject to a cap. 阅读全文
What Is an ARM? An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts annually thereafter for the remaining time period for a total of 30 years. After the set time period your interest rate will change and so will your monthly payment. The monthly payment amount is usually subject to a cap. 阅读全文
Loan Characteristics and Their Effect on Your Prospective Investment Project
Most real estate investors acquire income properties by obtaining a loan. As you are probably aware, maximizing loan funds (or OPM—Other People’s Money) maximizes leverage and, thus, maximizes returns. The right loan product can easily make or break a real estate investment deal. As such, exploring various loan characteristics is more than warranted. 阅读全文
Most real estate investors acquire income properties by obtaining a loan. As you are probably aware, maximizing loan funds (or OPM—Other People’s Money) maximizes leverage and, thus, maximizes returns. The right loan product can easily make or break a real estate investment deal. As such, exploring various loan characteristics is more than warranted. 阅读全文
Using a Lender Credit to Subsidize Closing Costs
Closing costs typically range from 3%-6% of your loan amount. A closing cost estimate priced today for a loan amount of $200,000 was $7,100 (3.55% of the loan amount). In this scenario the client was not paying any points for the interest rate. 阅读全文
Closing costs typically range from 3%-6% of your loan amount. A closing cost estimate priced today for a loan amount of $200,000 was $7,100 (3.55% of the loan amount). In this scenario the client was not paying any points for the interest rate. 阅读全文
Why debt to income ratio matters in mortgage?
Paying your bills on time, having stable income and boasting a good credit score won't get you a mortgage loan if your lender determines that you live too close to the edge. In the mortgage lending world, your distance from the edge is measured by your debt-to-income ratio, which, simply put, is a comparison of your housing expenses and your monthly debt obligations versus how much you earn. 阅读全文
Paying your bills on time, having stable income and boasting a good credit score won't get you a mortgage loan if your lender determines that you live too close to the edge. In the mortgage lending world, your distance from the edge is measured by your debt-to-income ratio, which, simply put, is a comparison of your housing expenses and your monthly debt obligations versus how much you earn. 阅读全文
The Bi-Weekly Mortgage - Who Needs It?
Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments. 阅读全文
Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments. 阅读全文
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New Jersey, Jersey City, Hoboken, Weehawken, Fort Lee, West New York, Edison, Summit, Short Hills, Millburn
New Jersey, Jersey City, Hoboken, Weehawken, Fort Lee, West New York, Edison, Summit, Short Hills, Millburn