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Would You like to save thousands of dollars on your home mortgage and pay it off years early without going through the hassle and expense of refinancing? You can! By using a principal based biweekly mortgage reduction plan. These plans work by making 1/2 payment every 2 weeks thus you create an extra payment every year to be applied to the principal of your loan. By now you may be rolling your eyes and wondering , What is this guy talking about? Let me explain further. We all agree there are 52 weeks in the year, right? There are 12 months in the year, right? So if we make 12 payments, one payment every 4 weeks, we have only used up 48 weeks (4 x 12 = 48) that leaves a whole 4 weeks left of the year to make another payment! This is because there are more than 4 weeks in a month, ( 7 x 4 = 28 days ), excluding February (except in leap years). So by adjusting your payment schedule to make 1/2 payment every 2 weeks you actually can squeeze in an extra payment every year. But how much difference can that make? A LOT, if the extra payment is properly applied to the principal of your note. For those who aren't sure what that means, principal is the original amount for which you made your loan before it began to accrue interest. The sad part is, most of us pay many years on our mortgage before we begin to accumulate any significant equity (the amount of actual principal paid on a loan) the fact is, that after paying 10 years on a 30 year note the majority (about 90%) of the money you have paid has gone toward interest and you have made little progress toward building equity. On a $100,000 thirty year mortgage at 8.875 % interest, you would pay about $186,440 in interest alone. If placed on a biweekly program the interest paid would be $120,772 that amounts to a $65,668 savings and the loan would pay off 9 years early in 21 years instead of 30! These plans help you build equity at over twice the rate of a regular payment plan. After 10 years, equity would be over $26,000 on a biweekly plan verses only $10,771 with standard monthly payments on the $100,000 example note. Another twist to the story is, that according to Government agencies, if you have an Adjustable Rate Mortgage, there is a 40% - 50% probability you've been overcharged by your lender. According to the U.S. Government the average overcharge is around $1,500. The good news is that there are companies that specialize in helping you beat the high cost of interest. They offer a variety of options from complete loan management including auditing services to programs where they furnish the materials you need to manage your own biweekly plan with audit services as an option. Most offer a free evaluation of your mortgage outlining the amount of money you will save and the time that will be knocked off your mortgage. The newer your mortgage is the larger both these will be. There will usually be a one time "set up" fee of $400 - $600 and a biweekly fee of $2 - $4 on the more complete packages. This should include automatic transfer of funds from you account every other week and free yearly audits of your mortgage to ensure that all principal payments are being properly applied to your note. With these full service packages your only responsibility is to see that funds are available in your account every 2 weeks. When combined with payroll deduction all you have left to do is figure out how to spend the money you will have saved when your note is paid off. For some this is a worth while program just for stress reduction alone. The less expensive client managed programs range from around $75 to $400 depending on the amount of responsibility you are willing to take on and the availability of auditing services included in the plan. An audit of your mortgage may be a worthwhile investment especially if you turn out to be one of the thousands of people that don't know they have been overcharged and are entitled to a refund. There are several companies that specialize in working with existing notes and some even offer programs for vehicles, boats, and R.V.'s. A few banks now offer biweekly services although banks may require costly refinancing. Be sure to crunch the numbers and look at the bottom line after any refinancing charges are subtracted from your savings. Before you sign anything be sure to compare the savings and length of time until pay off with a specialty company that does not require refinancing. A biweekly program can help you build equity in your home nearly 300% faster should you be planning to take out a home equity loan or sell in a few years. Best of all it could put several thousand dollars in your pocket that you hadn't counted on for travel, a child's college fund, or retirement, plus add several more debt free years to enjoy. By doing a little shopping around you should be able to find a biweekly mortgage reduction that will fill your specific need, be it a full service package or a client managed program. May you be successful in all you do! Donovan & Dana Walker are diversified cash flow specialists who work out of their rural home on the edge of the Kansas flint hills. They specialize in biweekly mortgage reductions, accounts receivable financing, and buy privately held mortgages. They are especially interested in working with the log home industry. Should you be interested in a mortgage reduction plan or a home based employment opportunity showing others how they can save on there mortgage feel free to contact them at Accelerated Funding Group, PO. Box 572, Augusta Kansas, 67010, phone: 316-747-2551, fax: 316-747-2574, or E- mail: accelfg@aol.com. Do you have a time or money saving idea that wasn't included in this article? Please send it to tips @stretcher.com. We get the best ideas from our readers! Other Articles to Stretch Your Day and Your Dollar 10 Great Holiday Decorating Ideas!
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