Pay Down Your Mortgage Quicker with Bi-Weekly Mortgage Payments

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In most cases, yes! It’s essentially a process by which you make extra payments on your mortgage. That way, you save interest costs and pay off the loan faster.

How Does It Work?

You make a payment to your lender every two weeks instead of once a month. This means that each payment is equal to half of the monthly amount due. The result – you’re paying the equivalent of 13 full payments rather than the usual 12.

It gets even better! The full amount of the extra payment is applied toward the principal. And because the principal balance is the amount on which interest is calculated, paying down principal results in a reduction in accrued interest!

Let’s look a traditional payment monthly schedule vs. a bi-weekly schedule so you can see exactly how it works.

Example 1: Traditional monthly payments

Let’s assume you have a loan balance of $250,000 with a 6 percent interest rate and a 30-year loan term. In this example, your monthly payments are $1,498.88. So, over the life of the loan, you’d pay a total interest of about $289,595.

Example 2: Bi-weekly payments

Using the same loan balance and terms described above, the difference would be the following:

• $749.44 paid every two weeks

• About $225,490 paid in total interest

• This results in a savings of more than $64,000 in interest!

• In addition, the loan is paid off in 24 rather than 30 years

Bi-monthly payments are still a good strategy if you’re an individual who doesn’t plan to keep your house for 24 or 30 years. Why? Because bi-weekly payments still reduce principle, even over a short period of time.

For example, in the first year, the principle is reduced by nearly $1,600. And, at the end of the fifth year, the principle amount has been reduced by about $9,000!

How Do I Arrange Bi-Weekly Payments?

The first task is to contact lenders to find out if they do offer a bi-weekly payment schedule.

If they offer one, ask what the participation requirements are. In typical situations, lenders require you to have payments automatically withdrawn from your bank account since they dislike processing checks every two weeks.

Often, it’s the case that a one-time fee is charged for this service. The fee can be minimal or be in the several-hundred-dollar range, depending on the lender.

So, after all these benefits, how can there possibly be disadvantages to bi-weekly mortgage payments?

Well, the first disadvantage relates to a situation I mentioned above - the lender’s fee is very expensive for the service provided. In such a case, the costs may outweigh or cut down your overall savings.

A second disadvantage occurs when paying bi-weekly is too hard on your budget. Upfront, you need to make sure that you have the money available for the increased payments.

The final potential disadvantage relates to the length of time you plan to stay in your home. That can affect your overall savings on interest.

I recommend that you weigh the pros and cons of bi-weekly mortgage payments by using one of the many online calculators. Just enter your numbers and the calculator will give you a comparison.

If you’d like the assistance of an expert on the subject, contact us immediately!

New Changes to the HARP Loan Program Means More People Getting Much-Needed Help

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The announcement made recently by the Federal Housing Finance Agency about proposed changes to the Home Affordable Refinance Program (HARP) could mean that many more homeowners will get much-needed assistance during this difficult economic time.  Homeowners that are underwater have traditionally turned to HARP loans to help them refinance their homes, being able to keep them rather than losing them to foreclosure.  Here are the main differences between the old and the new programs and how they will potentially affect homeowners going through times of strife.

No More Glass Ceiling for HARP

With the old program there was a limit to how much borrowers could borrow with respect to thehome’s loan to value.  This posed a problem for many people that owed far more on the home than it was valued – given the steep decline in housing values during the past two or more years. 

New changes to the program will allow homeowners to refinance no matter how foregone the situation is with respect to more money owed on a property than its market value.  The elimination of the 125 LTV ceiling for fixed-rate Fannie Mae or Freddie Mac backed mortgages is by far the most impactful proposed change to the program.  This change will quite possibly help millions of people avoid undergoing foreclosure. 

Fewer Fees or Better Yet, No Fees For Some

As per the current HARP loan process, risk-based fees are assessed and applied to loans to protect the lender.  Considering borrowers’ credit profile, the lower the credit scores, the higher loan to value and that translates to greater risk to the lender.  Fees that are traditionally associated with this risk are a huge burden for buyers.

With the expected new HARP guidelines there will be no more risk-based fees for homeowners that refinance their home into short-term mortgages and fewer fees for others.


No Longer A Need For a Property Appraisal

The cost of getting an appraisal done on a home can get quite expensive and adds up when you factor in all the other costs of getting into a new home.  Most home purchases entail having an appraisal done on the home – at the buyer’s expense. 

The changes that are looking to be implemented soon for people seeking assistance through HARP will include eliminating the requirement of a new property appraisal.  The only thing that buyers need to be wary of is that there must be a reputable AVM estimate in lieu of the appraisal.

The Absence of Warranties That Put Lenders In a Stronghold
Lenders are at a huge risk when borrowers default on their loans and as a protective measure Fannie Mae and Freddie Mac guarantee those loans but not without a long list of warranties that protect the creditor.  At present, refinance loans that have these warranties or stipulations on them cause lenders to comb through each application very carefully before considering an approval.

With the proposed changes taking place, the warranties will be waived, reducing secondary exposure to lenders of buying back the loan in case of default or even indication of default.  The change will make it far easier for homeowners to obtain the refinance loan they seek to help get them out from underwater. 

More Time For Homeowners to Get Afloat

The HARP loan program began in April of 2009 and after an extension in March of this year (2011) the deadline was extended to June 30, 2012.

According to the list of projected enhancements to the program, the program’s deadline will be extended to December 31, 2013 – giving more homeowners more time to avail this opportunity.

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There are a few important things to mention regarding the upcoming announcement expected on Tuesday November 15th.  First, not only does the HARP loan apply only to homeowners that have a mortgage owned by Freddie Mac or Fannie Mae, the mortgage being refinanced must have been obtained on or before May 31, 2009.  Second, this applies only to homeowners who have not previously refinanced their home.

It is also important to note that these are projected changes – and they can change at any time contingent upon policy at Fannie Mae and Freddie Mac.

A More Active and Aggressive Way to Get Your Home Sold

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Have you ever stopped to think about just how passive some salespeople can be?  Consider all the automobile dealerships that have cars parked out on the lot, expecting the next prospective buyer to just drive right onto the lot.  Well, with real estate it’s a completely different ballgame.  Unless your idea of selling your home is to sit back and wait until the right buyer comes along at the right time, with the right price – a far better approach would be to get in touch with an agent that likes to move mountains on his or her own accord.

Here are just a few of the passive marketing techniques employed by an overwhelmingly large percentage of Realtors across the country:

• Putting a sign outside the home, hoping that a buyer will drive by.
• Listing the property on major national websites or the local MLS with the expectation that all the search criteria will be fulfilled with your home and an agent will be calling soon to make an offer.
• Hoping that other agents will notice the new listing and introduce it to their buyer clients looking for something similar.
• Advertising the property in publications, again with the expectation that the perfect potential buyer will notice the listing and respond.
• Holding one or more open houses with the intent to share the home in the buyer community hoping to generate interest.

In today’s market when almost everyone holds a smart phone or other tech device (read: tablet, notebook, laptop, book reader, who knows what next) allowing instant access to information – the last thing you can afford to do is to sit around and wait.  In fact, in many markets the only way to succeed in the endeavor of selling your home is to reach far out and grab the business.  In other words – you will have to make it happen yourself because it simply won’t happen on its own.

So the next time you find yourself asking an agent, your agent – or even one that you are thinking of hiring – what they will be doing to get your home sold, be sure that their answer shows they have drive, ambition and energy.

Strong Marketing Is The Cornerstone Of Successful Selling

Some would say that “marketing” is a just another word for sales – but that is hardly true. Sure marketing entails some sales within the larger scheme of things, but it covers a bigger picture that includes promotion, awareness, publicity and, very importantly, sales.

In real estate particularly, there are two basic brands of marketing engaged by agents across the nation and throughout the globe – and the difference can be measured in their levels of success.  Both passive and active marketing are techniques used by agents of every caliber but most top-producing agents utilize a far more active marketing stance.  In fact, when you consider the modern technological advances available today as opposed to years ago, it’s surprising that all Realtors don’t use the tools at hand to assist their clients.

Here are some of the ways that savvy real estate agents get their clients’ home sold faster, more efficiently and at a better price:

• Making regular contact with people in the buying circuit actively seeking homes in the current market.
• Utilizing all the latest tools available to measure the latest and most accurate market data and remain current with area comparables.
• Staying in constant contact with clients, via web chat, instant message, text message, real time email or daily phone communication.
• Providing useful tips, tricks and information through informational blogs and electronic communications.
• Personally contacting buyer prospects, sellers, other agents, buyers from out of town, major corporations with significant employee relocations, past clients and others.
• Tapping into extensive databases with client and contact information that includes word-of-mouth contacts and extended client databases of preferred lenders, vendors, suppliers and contractors.

Professionals who utilize this extra dimension of marketing are more likely to accomplish the success they set out to achieve.  Active marketing in terms of real estate is when Realtors go out and actively seek out potential buyers for the homes they have listed, using the tools that are “outside the box”.  They work to fill gaps and literally match properties to prospective buyers by calling their agents directly.  These are the people you should be working with to get your home sold.  These are top-producing agents.

To find out how we can help you get your home sold, call us today for a customized consultation so we can determine your needs and start working on it right away!