Guest Post: Half is More?

December 13th, 2006

Today’s post comes from Dr. James Maciokas of Marquee Mortgage. No, he doesn’t have a doctorate in mortgages (actually experimental psychology & neuroscience), but he’s an exceedingly sharp guy and is very attentive to his clients.

Today, he illustrates a strategy to carve years and interest dollars off your mortgage.

Do you want to know an inside secret the mortgage industry does not want you to know? How would you like to save tens of thousands of dollars and pay off your mortgage 5-7 years early without paying a single penny more then you already pay? My father always says “if it sounds too good to be true, it probably is.” Well in this case he would be wrong.

Here is the secret, break your monthly payment up into two separate installments. Pay half on the 1st day of the month and pay half on the 15th day of the month. You may be asking yourself, how does this work?

Unlike rent where you pay on the first of the month for the “privilege” to live there for the rest of that month, with a mortgage you borrow the balance of your loan for the entire month and then pay interest on that money you borrowed for that month. So the payment that is due on the 1st of the month is paying for the money you borrowed the previous month, plus a little extra to pay down the balance.

Let us go over a scenario together, and use an example with a 30-year $200,000 mortgage at a rate of 6% and assume the next payment is due January 1st. To take advantage of this secret, we would pay our full payment on January 1st which pays the principal and interest for living in the house in December.

Then on January 15th, we would make a half payment and on February 1st, we would make the other half payment. For the life of the loan, we would continue to make half payments on the 1st and 15th of each month. Using this scenario we would save $48,600 and the loan would be paid off 5.5 years early.

In essence, instead of borrowing the money for the whole month you are now only borrowing it for 2 weeks and making a payment. So you save on interest fees for the last 2 weeks of each month. If you would like more information on how to implement this strategy with your mortgage, I would be happy to help.

In talking with James about this, he said it is admittedly a strategy that requires discipline. I encourage you to contact James with your questions on how best to implement a bi-weekly payment schedule.

Dr. James Maciokas - email
Marquee Mortgage
Phone: 971-327-1457

Technorati Tags: mortgage, bi-weekly, payments, interest, principal

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Entry Filed under: Mortgages