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Dear Dr. Don,
I have a 20-year mortgage on my house and make roughly an extra payment a year. How many years am I really knocking of
my mortgage? My loan was for $220,000 at 5.625 percent.
-- John Juncture
Dear John,
If you're a regular reader of this column, you know I'm not a big fan of biweekly mortgages. I don't see the need when
you can do it yourself and save by making additional principal payments on your existing mortgage.
Making the equivalent of an additional mortgage payment each year gets you roughly to the same point as
you'd be with a biweekly mortgage. You can figure it out for yourself by using the amortization feature on Bankrate's
mortgage payment calculator.
I used the calculator for your mortgage and, if you've been faithful about making that additional payment
every year since the start of the mortgage, your 20-year mortgage will be paid off in 17 years and five months.
That will save you about $21,800 in interest expenses, although that number ignores the tax impact of any
lost mortgage interest deduction. (Bankrate's calculator rounds the interest rate up to 5.63 percent, so the savings and
the interest expense aren't exact.)
I assumed that you made additional principal payments each month equaling about 1/12 of a scheduled monthly
payment. The calculator gives you other options for additional principal payments.
Bankrate also has a biweekly
mortgage payment calculator. I ran your inputs and it showed you saving $22,239 in interest and having the loan paid off
in 17.3 years (17 years and four months).
Who needs a biweekly mortgage when you can do it yourself and not make the additional payments contractual?
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