What is the best way to make an extra mortgage payment?

My clients often ask “what’s the best way to pay-off their mortgage sooner?” There are three ways 1.) pay a little extra every month, 2.) make an extra mortgage payment at the end of each year, or 3.) pay your mortgage on a biweekly basis (equity accelerator method).

By using one of the above methods you’ll cut 9 or more years off the term of your loan; thus, saving thousands of dollars in interest payments. But which one is the best method? The best method is option #1, paying a little extra every month toward your principle. If you can pay an extra $100-200 every month you’d be surprised how much sooner you’d have that mortgage paid off. Please give me a call and I’ll calculate exactly how much you would have to pay extra each month to cut 10 years off the life of your loan.

Option #2, making an extra payment every year, usually isn’t a viable option for most people since this requires making two payments during one month every year.

Option #3, making biweekly mortgage payments or the equity accelerator method, is an option most lenders offer their current borrowers. You’ve probably received “equity accelerator” letters from your lender. Here’s the deal: The “equity accelerator” company will charge you a fee, typically $395, plus $6 per month, to extract biweekly mortgage payments from your checking or savings account. The biweely payment will be half of your current principal and interest payment, excluding insurance and taxes. If your P&I payment is $800 per month the company will take $400 every two weeks from your bank account. This is equivalent to
13 payments every year; thus, reducing the term on your mortgage.

This plan works, but over the long run those small fees add up. In my opinion, stick with option one or two.

Feel free to contact Doug anytime. He is always available, so call him today or apply online, and let him go to work for you!  619-286-9596