Use Your House To Pay For Your House

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Few people have heard of the technique of using your home to pay for your home. It requires self-control and a change in habits, but doesn’t everything in life that’s truly worthwhile? So put your mortgage on a diet and quit paying extreme interest rates to your bank by paying off your mortgage early, then using your “former house payment” for other investments.

First, so you’ll know what we’re talking about, let’s review the common early payoff techniques. The oldest one around is to just add a little extra when you write your check, either every month or whenever you have it. Even a one-time $5 additional payment to principal could save you $50 in interest over the life of the loan.

Some people make a regular habit, even using automatic withdrawals from their checking accounts, to add $100 or more (or less) per month to their home’s principal only. It is very important to specify to your lender that you are not “paying ahead” on next month’s bill, but do, in fact, want the entire additional amount applied to “principal only.”

Bi-monthly mortgages became popular in recent years, but not as popular as they could have become. You see, many lenders agreed to accept half of the monthly payment at the first of the month and the other half mid-way through the month. The problem was, they were saving up the first payment and applying them both at once. So not only was a buyer not paying fast, it could be the buyer was actually paying more slowly.

In a “true bimonthly,” half of the payment is applied as principal and interest twice a month. It’s still a little confusing though, because of the ambiguity of the modifier “bi.” “Bi” can mean twice in one period or every two periods. So a bimonthly payment could, conceivably, be paid twice in one month or every two months. You see the problem


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