ShareThis Page
Business Headlines

Splitting mortgage payments could save homeowners thousands

| Wednesday, March 16, 2016, 11:00 p.m.

Homeowners interested in saving thousands of dollars over the life of their mortgage can follow a simple trick: pay half a monthly mortgage bill every two weeks.

This isn't financial alchemy but simply a scheme that takes advantage of the calendar's 52 weeks. While most home­owners make 12 monthly payments a year, sending half every two weeks equals 26 payments a year, or 13 full payments.

That one extra monthly payment will yield big savings on a typical 30-year loan.

For instance, a homeowner with a $100,000 mortgage and a 5 percent rate will shell out more than $93,000 in interest over 30 years. By making one additional payment a year, that same homeowner will owe $76,000 interest — an 18 percent savings — and he will pay off his mortgage nearly five years faster, according to MortgageCalculator.org.

There is a potential problem with paying a mortgage every two weeks, warned Barry Zigas, director of housing policy for the Consumer Federation of America, a Washington advocacy group.

“A lot of lenders don't allow split payments,” he said.

Borrowers considering paying every two weeks should check with their lender first, he said. And while the stipulation is becoming much less common, borrowers also should make sure their mortgages don't have a penalty for paying off the loan early.

Even if split payments aren't allowed, most lenders let borrowers pay extra each month toward the principal of the mortgage, Zigas said.

A homeowner could divide one monthly payment by 12 and then add that amount to each month's bill, he said. Just make sure the lender knows the extra amount should be applied to principal, usually by checking a box on the payment slip.

“Consumers who want to do that should pay careful attention to how they do it,” he said.

Homeowners also have the option of setting aside a little each month and then making a 13th monthly payment each year.

Zigas also warned borrowers to watch out for companies that offer to help pay down a loan faster by collecting payments every two weeks.

Those companies charge a fee for the service that most people can simply do on their own, he said.

“A consumer needs to figure out if they're really saving money” by paying a fee, he said, “and ask themselves, ‘Can't I just do this myself?' ”

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or anixon@tribweb.com.

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

click me