This Hack Actually Works 

Always check with your lender before doing this. Some lenders will not accept partial payments and will simply hold your 1st half till they get the second half then apply it all together. This is not helpful in paying off early or saving interest. They usually however will accept extra payment towards principal which definitely does help, the catch is, you are still on the hook for your entire payment amount each month.

i am currently in a bit of a situation , with rates not as subsidized and my mortgage still as high , i am currently seeking alternatives to maximize savings without an RV move or taking a loan. I’m seriously contemplating the latter.

52 weeks in a year, 26 bi-weekly periods, and 12 months. If you pay half of your monthly payment bi-weekly, you effectively make 13 of your monthly payments in 12 months.

Bank: "Here's a 300k house for only 792k!"

She paid 28,600 a year. He paid 26,400. 52 weeks in a year= 26 payments at $1100. 12 months is 12 payments at $2200

My lender doesn't allow half payments. I just pay extra on the principal every month.

Make sure your mortgage is structured to allow early pay out, or you may still owe all the interest!

It's called bi-weekly accelerated. Not every bank offers it and it comes with a higher rate.

You can also do a single extra payment per year to principal and get a similar result

I tried this with my lender and they called me because I was late on partial payment. Paying half on the last day of the month didn’t count for the following month.

We always pay our mortgage weekly with an extra $50 above the scheduled payment. We paid off our first mortgage off in 17 years, and now we are on track to pay off our current mortgage in 15 years instead of 25 years, which is the average length of a mortgage in Australia 🇦🇺

It's because your paying on the principle every 14 days versus every 30 or so. The interest due is decreasing every 14 days

I had a bank apply additional money I paid them into the escrow account. When I found out I was angry but they did move it from escrow to the principal. I agree talk to the lender. Communication is important.

This is a biweekly payment. Its an option at the time you take the mortgage (in Canada) it works because there are 26 biweekly payments instead of 12 montly payments. You're basically paying 13 months worth every year instead of 12 months. Depending on the terms you agreed to at the time of the mortgage, you may also be able to make extra payments during the year, or lump sum payments occasionally. The mortgage i signed up for also allows yearly increases to the amount of the payments, up to 20%/year if you choose to do so (across 5 years). Make sure to read all the terms, its not just the interest rate that matters.

Lenders will generally only apply a payment to principal when the full amount is received.

Doesnt work on any mortgage ive ever had. Theyll take the half payment and it just sits until the other half is collected

The mortgage has to be structured to accept such payments. Most only calculate on a month and making an early payment would make no difference in interest.

Caution! A lot of lenders will now just hold onto the half payment until the second part comes in, thereby benefiting you nothing. You need to ask how payments are allocated. Talk to the mortgage servicer at the bank to find out

She's basically paying an extra month per year because there's 13 sets of four weeks.

Sometimes your lender won't let you set up payments like that

Every month has approximately 4.33 weeks in it; But paying every 2 weeks, two payments = 4 weeks, shaving off 0.33 weeks. That’s 3.96 weeks in a year, and 9 months out of 10 years.

Now THIS I can get on board with!

Absolutely bananas how much Interest is paid. More than the loan amount

12 x 2 = 24 half payments, 52 weeks / 2 = 26 half payments. Just 2 additional half payments, or an additional month payment results in 7 years less time.

Such an informative clip I had to watch twice

This only works IF the lender allows and Immediately applies the partial payments, instead of holding it until the FULL amount is received. If they don't give Immediate credit for that partial...it is UNAPPLIED funds. PRO TIP: INSTEAD....SIMPLY take the same amount of that extra payment, divide that amount by 12 (amount of months in the year.), add that 1/12 increment as a Principal payment. Every dollar is applied IMMEDIETLY vs held for 2wks, as Unapplied funds. Remember, the lender may accept the $, but only put it in a holding account instead of crediting it. Pay as Principal Instead 🎉

We've all heard this a million times what you all seem to ignore is the fact that many mortgage companies do not permit partial payments! If you want to do this you need to make sure that your lender will allow it before you get the loan. You can also do the exact same thing by simply making one extra payment per year

This only works with 8% mortgage. If you have a low mortgage (3~4%) you're better off taking that money and investing it somewhere else where you gain ~7% on it.

This was the best advice I received from a colleague as we were closing on our house. Started in the first month and we're already 2 full payments ahead.

Wow who wouldve thought that paying more would mean paying less in the long run

Or you just make extra payments and pay it off even sooner.

For anyone not grasping exactly how this works, a month is about 4.3 weeks. So you’re essentially paying a little more per month, and any extra payment toward your mortgage goes Straight to the principal of the loan (interest isn’t paid first for the extra money).

When he pointed at me and said “NO ITS NOT” I gasped

But isn't that just because she paid more over the years in payments?

Since when did we normalize paying 800,000 for a 300,000 house?

This works great if you also get paid every 2 weeks - otherwise your budget will be a little weird, because you'll have to budget a little extra to cover the extra amount you'll be paying

Now you’ve paid 13 payments instead of 12z and you were cash poor all year. Better option. Take your payment / divide by 12. Save that amount each month. At the end of the year, take it and make the extra payment.

We did this a few years in when our lender offered it, and paid off our mortgage more than five years early.

It's not a hack to spend an extra 2200 a year.

I just ran those numbers. I thought the Ramsey method was to never do a 30-year mortgage????? on a 15-year mortgage at 8% Will's monthly repayments would be almost $3000. Also to stick to the 30% rule his income would need to be $170K.

Yeah, the banks have gotten wise and are restricting this. They always win...

Partially because a month is more like 5 weeks, not 4 weeks. Depends also if interet accumulates by day or week or month etc. You could say the same thing that he paid 2,200×12=26,400 a year. She paid 52weeks a year so bi,weekly was 1,100x26=28,600 a year. So yes, paying more than the minimum means you pay less in interest

What's crazy is no where does anyone talk about the 350k in interest you paid over 17yrs for your 300k home. You paid almost 700k for that home not counting repairs ect

I used to work with helping people who were in danger of being foreclosed on. Most lenders only accept full payments. You can add extra to your full payment, and you can make more than 12 full payments in a year usually, but you can't always cut those payments in half and pay twice.

😂😂😂 said another way… lay 13 times a year not 12. Duh no ishhhh you’ll pay less interest.

I heard this, but you scrape together an extra half payment one time. That way you'll always be on time or a half payment ahead.

Most lenders will not let you do this.

You could achieve the same goal by making extra principal payments. Should you do that for 8% yes. 3%? Hell no. 3% is a free money loan.

There will be 2-3 months every year where she will make three payments instead of two, due to how the weeks line up. So, every year she’s essentially making an extra monthly payment, putting her ahead on the loan.

This is wrong. Most banks won't let you do partial payments. You're just repeating something you saw someone else give as advice, because you wanted to make a video.

He leaves out the part where Whitney is actually making an entire extra mortgage payment every year

We all have heard to do this a million times. Mortgage companies heard it too. I applied to 3-4 lenders for my mortgage and none of them allowed this anymore. They won’t accept partial payments. Get this clip back to 2008 where it belongs.

8% is insane. Taking into account where we were just a few years ago.

Some banks will ask if you want to do this.. look into it when they ask though.

The interest on the principal every month is the real scam

In the uk you can usually pay off 10% a year extra. Interest is usually calculated daily as well

Not all banks apply the payment when recieved. Sometimes they hold it and apply it when the full payment is received so there is no benefit.

Based on the compound interest calculation model, the increased payment frequency every fortnight will cause the number of compounding times to be increased whilst causing a reduction in the outstanding amount because of the biweekly repayments.

It’s the same thing when you get paid every 2 weeks. You get an “extra” check on certain months of the year and it feels like a bonus.

Banks don’t typically allow this.

This is not how it works. At the end of the month they pay the same. You can't short a payment and somehow one goes to principal and one to interest.

Still didn't tell me why

Yeah, I asked about this but the bank don’t allow it. I paid 100$ more instead .

My lender does not accept partial payments, however they do accept additional principal only payments of any amount. I do that every month.

If she was going to pay it off early she should’ve gone for 15yr mortgage that would’ve given her a lower rate🙄

This also doesn't take into account that every 2 weeks means 26 payments - aka 1 extra months worth every year. If your lender even lets you do partial payments (which a lot dont), you will still save some time but not the 7 years

1. Make sure your loan can be paid off early without any penalty and accepts extra payments on the principal before you sign. 2. Make extra payments on the principal.

Meanwhile, Will decided that instead of paying an extra mortgage payment every year, he would put that money in an index fund. After 23 years, his balance was over $350k. He is excited about further compounded interest on that.

Bi weekly payments increase the principal payments as it's like you paying 13 months per year, this shortens the loan duration by 6-8 years on the typical mortgage. You could simply reduce your mortgage duration from 30 to 25 years or from 25 to 20 years and achieve a similar effect.

To those who say their lenders will not accept partial payments, I wonder if just one individual borrower holds the leverage to negotiate this pay structure into the contract. You'd think so, but often times, large companies offer what they offer as a matter of policy for the purposes of simplification, less data points to consider and analyze, but most of all, they make less money in the end and are so big, they would rather kick you to the curb than bend to one's will, though perhaps smaller lenders would likely be open to a negotiation, as they need all the business they can get and if that is one thing that sets them apart from the big boys on the block, they'll take that deal, theoretically.

Lenders have caught onto this and a lot are not allowing borrowers do this. I tired with my lender and they don’t allow it.

I used this method to pay off my house and credit cards faster. You do have to call the mortgage company and tell them your extra payment is towards the principal.

I always hate how they fail to explain that by doing this you will be making 1 Additional payment in a year as 2 of the months will have a time where you will have to pay 3 times a month. Because this is not making 2 payments a month. This is half a monthly payment every 2 weeks. But not all months have 4 weeks in them... some months you will be making 3 x ( half the monthly payment) in the same month.Meaning you will actually need the cashflow those 2 months to be able to make this happen... It's an amazing thing to do and you should 100% do this if you are allowed by the lender but still... people need to stop explaining it like it's magic.

Lenders won’t let you do this anymore, you can but they charge a fee which usually offsets the savings

Just pay your normal monthly payment and then pay a little extra on the principal only this way you don't have any legal issues because you have paid the normal monthly payment and then you added to the principal extra money

My mortgage doesn’t accept partial payments. A lot of them don’t.

It is not a “half payment” is bi-weekly (every two weeks) payment schedule vs the once a month payment schedule. The bi-weekly will save you money because when they go to calculate the interest your outstanding debt is lower.

That’s not how weeks and months work. Had me cracking up.

These youtube professionals.. Would you mind sharing which mortgage lender will actually let you do this? Because I have never heard of one.

Forget about this Bi-Weekly mortgage payment. Just put extra payment toward principle in the amount of (Monthly / 12). That's it.

I don't know how it works where you are, but all the banks in Australia compound monthly, so it doesn't matter if you pay every 2 weeks, it's gonna be the same as monthly

Also, make sure there's no prepayment penalty in the contract. Kinda wipes out the whole reason for paying extra principle

There's 13 payments in a year if you pay every two weeks. But only 12 months in a year if you pay onve a month. Effectively the personpaying every 2 weeks is paying an extra payment every year Will pays $26,400 a year Whitney pays $28,600 a year

She made an extra payment every year.

Except Will took the extra money he could have used like Whitney and instead invested $183 (2200/12) monthly into a good growth stock mutual fund and in 23 year made over 193K, thereby having $60,00o more them Whiney saved

Whitney is a genius. She gave the bank $355,000 . She should give a class on how to be broke forever.

Biggest reason for this isn’t “hacking” the amortization. Making half payments every two weeks works out to 26 half payments or 13 full payments in a year vs the standard 12 full payments.

The majority of mortgage companies will not allow you to do this and also they calculate monthly not weekly so the interest doesn’t accrue that way. It would equate to the same amount of interest per month whether you paid it in daily portions or one monthly lump sum, it does not shave a dime off the mortgage. Have seen this many times before but if you look at many mortgage companies to combat this they do not have interest accrue this way intentionally. Now she is paying an extra payment per year because she pays biweekly, that part will work, but the idea that you save on the interest accrual after talking to several mortgage companies and banks apparently they have a “hedge” against this.

Love this! I needed to see the numbers. Just hearing it is hard for me…

My lender will not let me do this. So instead I pay every month on the 15th instead of the first. I make that payment as late as possible without getting any penalties because screw them.

Amy just got a 15 year mortgage to start with and ended up paying a TON less in interest

Just pay extra toward the principal each month.

Both Will and Whitney are way ahead of the renter who paid 792,000 dollars in rent. The renter has nothing to show for it. The renter also did not get the tax breaks on the interest that both Will and Whitney enjoyed.

Check on the loan and with your bank. In many cases this isn't how it works. You are better off make and extra payment to principal whenever possible as opposed to this method. The last mortgage I had the interest was figured monthly, not weekly, so making these types of payment would not have changed anything.

That’s why I’m paid 13 times a year (not quite the same affect as every 2 weeks) but a closer medium

Most banks won’t allow this. Most banks will allow you to pay extra on principal (at least 10k) then recast the loan which keeps the same interest rate and term but lowers the payment. Then you can make the regular payments you were before with the extra going to principal only.

You should teach people where that mortgage money comes from, and the implications on society future. Aka, the fractional reserve banking system. The bank literally does not have 300,000 to loan you. They only have 15,000. But for some reason, they can create the money, and get paid all of it, with interest. Over 30 years, the bank turns 15k into 500k.

Has anyone done a calculation of this? (1,1k * 26 * 7) is not 300k, it's 200. Whitney isn't done paying in 7 years. She needs to pay at least 10,5 years for the 300k, and then it'll take a bit longer for her to work through the interest. This comparison is bad.

Note its called accelerated bi weekly payments. If you just choose bi weekly payments but not accelerated you are back to square 1, you will not save time or money.

This only shows HALF the story. If you take that half extra payment and invest it. What do you get. More then 132k!