13
Why so unlucky…
Well, everyone has their own reason.
And I won’t get into which reason is the best.
Instead, let’s talk about the lucky ways 13 affects your mortgage balance.
Standard 30year Fixed Mortgage Repayment Schedule
You’ll make one payment a month, for 360 months. And each mortgage payment is split into two parts: a portion goes to your principal and the other to your interest.
Now the principal portion is applied to the amount that you owe the bank. This lowers how much you owe. The interest portion is your cost for borrowing from the bank.
As years pass, more the split goes to your principal and less to your interest. Yet, in the early years, most goes to pay your interest.
That’s why 5 years into your mortgage it will look like you haven’t paid off much (the fancy banking terms for this called your amortization schedule)…
But don’t worry, this is where old lucky 13 comes into play.
Bi-weekly Repayment Schedule
A bi-weekly repayment shortens your loan’s amortization schedule. Instead of taking 12 payments per year, you make 1 every two-weeks. Or 13 total payments per year.
Now, you can’t technically make 13 payments per year – that’s not how a mortgage works. Actually, you pay a certain amount of interest on an annual basis and that amount is covered in your first 12 payments. The 13th payment has to go somewhere.
So 100% of it gets applied to your principal balance (what you owe the bank). And, with each “13th payment”, your loan balance drops by the entire amount of the payment…
Which means you can slash many years off your mortgage. And save thousands of dollars in interest charges. Not bad, right?
I bet you’ll never look at 13 again the same way.
Article Written By:
Bruce Waller- Mortgage Loan Originator
NMLS # 1002298
(267) 362-4002
bwaller@rhfunding.com
The views and opinions expressed on this web site are soley those of the original authors and other contributors. This is not a commitment to lend. All rates, fees and loan terms are subject to a formal loan application, credit risk, appraisal evaluation and other lending criteria. Programs, rates, terms and conditions are subject to change without notice. Other restrictions may apply.