How to Save $66,000 on Your Mortgage

Bi-monthly loan payments save money and time

0106_WFL_HinsonslideWhat if you could pay off your 30-year mortgage in 22 years?

Would you do it?

Consider this, making bi-monthly mortgage payments instead of traditional monthly payments can shave six to eight years off a mortgage term by adding an additional payment per year, which goes directly to the principal, says Joseph Ellis, an investment strategist.

Ellis was one of several panelists who spoke about money and finance strategies at the 100 Black Men of America’s 23rd Annual Conference at the Hilton Hotel in New York.

Here’s how it works: He and his wife schedule automatic deductions from their checking accounts every pay period (two weeks) that pays their mortgage directly — talk about set it and forget.

Not only do they cut down the risk of missing or late payments which can do severe damage to your credit, they will end of saving $66,000 once the mortgage is paid off, Ellis says.

On the downside, there may be enrollment or transaction fees assessed to borrowers. For some lenders, enrollment fees range from $295 to $379, according to Bankrate.com. Others may levy charges per transaction or an “upfront charge.”

Do the math, if the interest savings you’ll gain over the life of the mortgage outweighs the fees, than a bi-monthly mortgage may be right for you. For more information, check out this bi-monthly mortgage calculator.

This is definitely a topic we’ll revisit in my weekly Cutting Edge blog. Check back later, I’m heading back to the conference, but I’ll keep you posted on other juicy tips and information.

The 100 Black Men of America 23rd Annual Conference runs from June 10-14.

Renita Burns is the editorial assistant at BlackEnterprise.com

ACROSS THE WEB
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  • http://www.plancorr.com Antoine Orr

    Hi Renita,
    Great advice, but I thought one of the advantages of being a home-ower (not a typo) is to get the tax deductions/savings on the interest. Making additional payments will reduce those tax savings.
    Furthermore, may be going into a house that is depreciating in value, not to mention the fact that the if a home-ower needs to access cash from the house, it can only come out as loan. In short, the home-ower will have to pay a fee to get the money out of the house.

    Here is a better solution that will allow the home-ower the ability to pay the house off early, take full advantage of the tax savings on the interest and have access to cash when they need it, without a fee of course.

    1. Put the extra payment into a fixed account. This fixed account can be used to bridge the gap when the home-ower looses a job, etc. At year 15, the home-ower should have enough money in the fixed account to pay cash for the remaining balance of the house.

    2. By utilizing the fixed account, the home-ower is able to take advantage of the mortgage interest tax savings.

    I hope this helps.

    Antoine Orr

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