Is There Any Good Information In Those 'Pay Off Your Mortgage Early' Ads?
There are basically 2 common 'How do I pay down my mortgage early?' discussions to be had. The first is dealing with those annoying internet ads that make it sound like there’s some little-known trick and claim 'mortgage companies don’t want you to know.'
I probably don’t have to tell you that’s clickbait. If you want to 'pay your mortgage off in 10 years!' your monthly payment has to go up proportionately, which is where the letdown comes in for most people. Sorry, no magic.
What about that bi-weekly payment strategy? All a bi-weekly payment plan does is pay half of your monthly payment every 2 weeks. That’s 26 payments per year, which translates into 13 monthly payments. Is that magic? No, you just paid more each year. You could have just as easily made one extra principal payment at any point in that year to get to 13 payments. Or you could simply set up an autopay and add 1/12 of your monthly payment to each payment resulting in 13 payments per year. The bi-weekly payment is just a marketing tactic used by lenders so they can show you how 'their' way pays your loan off in 26 years instead of 30.
The second discussion surrounding paying a mortgage off early centers around scenarios when you actually have the means to pay a mortgage off and are wondering if you should. I will discuss this next week.
I'll be available all weekend if you have a client who needs to be prequalified before Monday!
Have a great weekend!