Some financial planners advise making two half payments on your mortgage each month instead of one full sum. The idea is that homeowners will save thousands of dollars over the years in interest payments. Does this idea hold water?
Photo by that girl su.
Finance blog The Simple Dollar posits that, assuming your lender allows you to split your monthly payment without penalty, the plan just might work. Your next job, then, is to find out when your interest gets compounded. If it's only monthly, then half-mortgage payments won't do a thing. If, however, your interest compounds based on the average monthly balance, paying it down partially mid-month will end up saving you money over time.
If you decide to go this route, you can just pay half the balance twice a month on, say, the 15th and the last day of each month. The full post, however, suggests another way.
... A superior method of doing this would be to simply make a payment equal to half of the amount of the monthly mortgage bill every two weeks. Over the course of a year, this adds up to one extra full payment: since there are fifty two weeks in a year, you'd make 26 half payments, and thus 13 full payments.
Hit up the post for more details to help decide if this plan is right for you, and get more tips for making half-monthly payments work with your budget. Have you tried this method out yourself? Share your experiences in the comments.
Mortgage "Half" Payments: How Much Do They Save? [The Simple Dollar]