Should I pay my mortgage bi-monthly?

Article by R. Joseph Ritter, Jr. CFP® EA

From time to time you may receive a solicitation disguised as a formal-looking invitation to pay your home mortgage or vehicle loan on a bi-monthly basis as opposed to monthly per the payment stubs for your loan.  Is it a good idea to do this?

The short answer is yes, you can save some interest and shorten the duration of the loan by paying more frequently than monthly. You can also save interest and shorten the duration of your mortgage by paying extra in principal and designating in a note to the mortgage company that it is to be applied to principal (otherwise they may apply it as a regular payment with some going toward interest).

This does not mean, however, that you need to use the company that sent you the solicitation/invitation letter. No one does anything for free.  Often these companies charge you extra for the convenience of making bi-monthly or weekly payments.  You can accomplish the same goal by sending bi-monthly checks yourself without the expense of a third-party between you and the mortgage company.

Read the fine print very carefully before you accept an invitation.  You can also call the mortgage company yourself and ask them if they would charge you a fee for setting up bi-monthly payments.

You should note that if you enroll in a program to pay your mortgage more frequently than bi-monthly, you will likely be charged late fees for not paying on time. If you were to send in checks on your own and not enroll in any program, you would not incur a late fee if you decided to pay once per month from time to time.

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