• Rudnick-Hosek-Pendl


Looking to save money on your mortgage? See what Attorney Scott Rudnick has to say about using the math in your favor!

If you are making Mortgage Payments to a Bank on your real estate, you have probably received many solicitations promising to save you bundles of money by converting you from a monthly to a biweekly payment schedule. In fact, you can save a pile of money by making half of your monthly payment every two weeks. It’s not hard to see that 26 half payments equals more out of your pocket then 12 full payments. But what’s less understood is the fact that paying biweekly also shaves dollars off your debt by functioning as a prepayment.

Mortgage debt is a compound-interest problem in reverse. Paying a dollar in extra principal during the first month of a 30 year Mortgage is like earning a 5% return, or whatever rate your Mortgage is, for 30 years. In real-world terms, let’s say you borrow $200,000.00 at 5%. Making regular monthly payments will mean a monthly nut of $1,073.64. After 30 years your loan is whole, but you’ve paid a total of $186,510.40 in interest alone. By making biweekly payments of $536.82 (half of $1,073.64), you own the home after 25 years and you’ve paid only $152,184.93 in interest – a savings of $34,325.47. True, you have paid more each year with the biweekly schedule ($13,957.32 versus $12,883.68) but if you can handle just over $20.00 more a week, that $34,325.47 is yours to keep and the house is yours 5 years sooner.


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