Is the New Millennium Method Really $1.204,000 Better then a Bi-Weekly Mortgage
This Article will compare and Contrast the Old-School Bi-Weekly Mortgage Method with the New Millennium Invest the Difference Method. Can The New Millennium Method really result in over $1,200,000 more money in your Retirement Account. A Bi-Weekly Mortgage is a Craze that has been Sweeping the Mortgage Trade since those 18% and Higher Mortgage Rates of the late 70's and early 80's. The basic premise behind a Bi-Weekly Mortgage is that instead of making 12 Monthly Payments a year you make 26 Bi-Weekly Payments a year. Each Bi_Weekly Payment is 1/2 of the Monthly Payment. You pay off your Mortgage Faster and Save Lot's and Lot's of money because you are making 13 Payments a Year instead of 12. That Extra Monthly payment has the effect of Dramatically reducing your Payoff schedule. Here are the results of a calculation done recently using an Online Calculator from a Popular Bi-Weekly Mortgage Program. The Example used a 30 year Fixed rate loan with a 5.5% Interest rate and an $$1,135.58 Monthly payment or a 567.79 Bi-Weekly Payment. - Current Balance: $200,000.00
- Interest Remaining (Current): $208,806.90
- Interest Remaining on Bi-Weekly: $168,980.52
- Estimated Interest Savings on Bi-Weekly:39,826.38
- Term Remaining (Current): 360 Months
- Term Remaining on Bi-Weekly: 301 Months
- Estimated Term Saved if on Bi-Weekly:59 Months
Looking over the above numbers A Bi-Weekly Mortgage seems very Promising and it is. You Save almost $40,000 in Payments and Reduce your Loan Term by 4 Years and 11 Months. So By Making 25 Extra Payments of 1,135.58 you pay $39,826 less interest over the life of the loan.With the New millennium comes a new and better almost $600,000 More Money in your pocket over the initial 30 Year Loan Schedule.
(Over $1,200,000 if the $600,000 is allowed to grow for your retirement nest egg.) Here is the plan in a Nutshell. You get a 30 Year loan with a Payments for the first 5 Years Fixed at an Interest rate of 1.95%. You then take the Money you save and Invest it in an Annuity with an Assumed 8% return. Your Payments on a 30 Year Mortgage at 1.95% = 734.25
You Invest $495.96 a Month for 30 Years at an 8% Return
- At the end of 5 Years you have Over $34,900
- At the end of 15 Years you have over $161,500
- At the end of 25 Years you have Over $435,000
- At the end of 30 Years you have Over $674,000
With The Above Bi_weekly Mortgage all your money $1230 on average monthly is going to pay your mortgage so
- At the end of 5 Years you have $0
- At the end of 15 Years you have over $0
- At the end of 25 Years you have Over $0
- At the end of 30 Years you have Over $86,500
(Since your Mortgae is Payed off 5 Years Early you now save 1230 a Month invested at a Return of 8% for 5 Years)
With the Old Bi-Weekly Method you have $86,500 in your Investment account. With the New Millennium Method you have over $674,000 in your Investment account. Almost $600,000 more.Going one Step Further, Let's assume each home-Owner is 25 when they get the initial Loan and they let the Money sit in the Investment Account for 10 More Years (until they are 65) at an 8% return.
- 674,000 at 8% will grow to $1,400,000 in 10 Years
- 86,500 at 8% will grow to $ 186,900 in 10 Years
This Equals a 1.2 Million Dollar Difference in your Investment (Retirement) Account at age 65.About the Author
Mike Makler is a Financial Consultant in the St Louis Missouri Area Specializing in Real Estate Loans and Annuities. To Learn More Call Mike at 314 398-5547 or Visit Mike's Web Page: http://ewguru.com/finance Get Mike's Newsletter Here http://ewguru.com/fin-news Copyright © 2005-2006 Mike Makler
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Suze Orman and Bi-Weekly Mortgages
I recently read a great article from Suze Orman about the pitfalls of setting up and using a bi-weekly mortgage program. In her article she goes on to discuss the reality of what a bi-weekly program is and how you can easily obtain the same results by simply making one extra mortgage payment per year to your lender! She gives a great example of how Wells Fargo Bank likes to charge a $295 set-up fee and monthly fees for the priveledge of using their bi-weekly program?wow! To read the entire article from Suze Orman click on this link: http://tinyurl.com/2g9rzp
Is the New Millennium Method Really $1.204,000 Better then a Bi-Weekly Mortgage
This Article will compare and Contrast the Old-School Bi-Weekly Mortgage Method with the New Millennium Invest the Difference Method. Can The New Millennium Method really result in over $1,200,000 more money in your Retirement Account.
The Pros and Cons of a Bi-Weekly Mortgage
Having a mortgage can be expensive; with the interest that is charged over the life of your mortgage, a large portion of what you end up paying is nothing more than interest payments and not the loan itself. Obviously it's important to be able to pay off your mortgage as quickly as possible in order to keep the interest at a minimum, just as it's important to make sure that all of your payments are made on time so as to avoid late fees or other costs. One option that can help you to pay off your mortgage early while giving you the added benefit of having to pay less at any given time is a bi-weekly mortgage.
How Do Biweekly Mortgages Work?
If you currently own your own home and are paying a mortgage, there's a good chance you have received a variety of related home financing offers from banks, or other lenders. One of these may have been an offer to switch your conventional mortgage over to a biweekly mortgage.
Mortgage Payment Cover, One Of A Family Of Payment Protection Insurance Policies
Mortgage payment cover is just one form of protection against losing your income In this case, your monthly mortgage repayments are protected against you losing your income
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