Hey, everyone! So, you’ve bought a house—cheers to adulting! 🥳 But hold on a sec,…
Bi-Weekly Payment Plan vs. Recast: The Power Duo for Mortgage Savings
Are you tired of being enslaved to your monthly mortgage payments?
Do you want to reduce your mortgage debt and save thousands of dollars in interest? Well, you’re in luck because the bi-weekly payment plan and recast can help you achieve those goals. Let’s look at a Bi-Weekly Payment Plan vs. Recast as two of several ways to accelerate your mortgage payoff.
First, let’s talk about the bi-weekly payment plan.
Instead of paying your mortgage once a month, you pay half of your monthly payment every two weeks. By doing so, you end up making 26 half-payments, which equals 13 full payments per year instead of the usual 12. This extra payment per year can help you save on interest and pay off your mortgage faster.
For example, let’s say you have a $500,000 mortgage with a 6% interest rate and a 30-year term.
Your monthly payment would be around $2,998. But if you switch to a bi-weekly payment plan vs. Recast, you would pay $1,499 every two weeks. By doing so, you’ll shave off almost 5 years from your mortgage term and save over $45,000 in interest over the life of your loan. That’s a lot of money you can put towards something more exciting than your mortgage!
Now, let’s talk about Recasting.
Recasting is like hitting the reset button on your mortgage, but without having to go through the hassle of refinancing. Essentially, you make a large principal payment, and then your lender recalculates your monthly payments based on the new lower balance. This results in a lower monthly payment and more money in your pocket each month.
So, let’s say you inherit a lump sum of money, and you want to use it to reduce your mortgage debt. If you pay off $100,000 of your $500,000 mortgage, your balance will be $400,000. If you recast your loan, your monthly payment will drop from $2,998 to $2,398. That’s a savings of $600 per month! You can use that money to buy yourself something nice or invest it for your future.
Using a bi-weekly payment plan and recasting your mortgage can help you save money and achieve financial freedom faster. So, stop letting your mortgage control your life and start taking control of your mortgage. Who knows, with all the money you save, you might even be able to afford a bi-weekly massage. Happy saving!