Mortgage question

Serviced By Others Wrote: ------------------------------------------------------- > comp_sci_kid Wrote: > -------------------------------------------------- > ----- > > Ok, whoever knows the answer please don’t spoil > it > > for others. > > > > Question: It is said that if you make your > > mortgage payments bi-weekly as oppose to > monthly > > you can shorten your mortgage duration by up to > 7 > > years. How is it possible? > > > Would a lender let you do this without prepayment > penalty? Are biweekly payment schedules typical? Some lenders won’t. Most lenders will, especially with all the competition in the market.

As always… IT DEPENDS. Unless you explicitly tell your lender that you’re making a payment against principal only, they will apply it to P&I for your next unpaid payment. The kicker is, if you make a payment early, they don’t apply it and reduce the principal until the 6th or 15th of the due-date-month. If you explicitly tell them its a principal-reduction payment, not a regular payment, they will reduce principal immediately, and it will decrease the total interest you pay over the life of the loan.

> Would a lender let you do this without prepayment > penalty? Are biweekly payment schedules typical? I could be wrong, but I thought there were usually no prepayment penalties on residential mortgages.

I just always assumed excess payment went towards the principal balance?

cre_analyst Wrote: ------------------------------------------------------- > > Would a lender let you do this without > prepayment > > penalty? Are biweekly payment schedules typical? > > > I could be wrong, but I thought there were usually > no prepayment penalties on residential mortgages. They are common. Sometimes they are optional and they chop off rate if you are willing to accept it in your contract.