1 Way To Shave 4 Years Off Your Mortgage

Here's one little trick that will pay off your mortgage faster and save you a ton in interest. And it should be absolutely free...

May 11, 2014 at 1:00PM

Source: American Advisors Group.

Do you want to pay your mortgage down quicker, but don't think you can afford much more than you're already paying? A bi-weekly payment plan may be the way to go for you. By simply paying half of your mortgage payment every two weeks instead of paying the entire payment monthly, you could potentially shave years off of your repayment time and build equity in your home faster.

Many banks charge for this, but several institutions with large mortgage businesses like Wells Fargo (NYSE:WFC) will let you set up a biweekly payment plan for free. While the saving of a few hundred dollars alone isn't a reason to choose Wells, it's one more reason that Wells Fargo has blossomed into the nation's leading mortgage lender.

Why it works
At first, biweekly and monthly payment plans may sound like the exact same amount of money coming out of your pockets, especially to new homeowners. However, there is one big difference.

We all know there are 52 weeks in a year, right? So, if you pay every two weeks, you're making a total of 26 payments each equal to half of your monthly payment. 26 divided by two is 13, so by using a biweekly payment plan you are actually making 13 full monthly payments each year, one more than you normally would.

Since biweekly paychecks are the most common form of payroll schedule in the U.S., it almost makes more sense to have money come out on each payday instead of holding it in your account until the end of the month.

The effect is pretty nice
So, how much of an effect could one extra payment per year really have on paying off your home? More of an effect than you may think!

To illustrate this, let's consider a $250,000 30-year mortgage at an interest rate of 4.5%. On a standard monthly payment plan, the loan would obviously take 30 years to pay in full, and the standard monthly payment amount would be about $1,266. However, on a biweekly plan it would only take 25 years and 8 months to pay the loan in full. In other words, those extra payments cause your house to be paid off more than four years faster!

And the early payoff isn't even the best part. The real benefit is the amount you save in interest over the life of the loan. Take a look at the total interest you pay with each payment plan.

You save more than $33,000 just by switching your payments to -- what I think -- is actually a more convenient payment schedule.

The smart banks offer this for free
For example, if you're mortgage is held by Wells Fargo, which is fairly likely since it has the largest mortgage business of any bank, the process is very easy. The company's Preferred Payment Plan allows mortgage holders to have biweekly (or weekly) payments automatically debited from their checking or savings account. Go online and call your lender to find out about their options.

This is an extremely smart move on the part of Wells Fargo, because in order to take advantage of the free payment plan, the mortgagee must have a checking or savings account with the bank. Wells Fargo services a lot of mortgages it didn't originate, so those customers have an added reason to open an account at what is already one of the most convenient banks in the world.

Will the others follow suit?
One thing that I can tell you is the biweekly payment plan should be free, so check with your lender to see if they offer it. Wells Fargo isn't the only bank that offers it, just the largest.

As soon as I bought my house, I started to receive third-party offers to set up a biweekly plan for my mortgage for a fee (about $250-300 seems to be the norm). By no means should you pay this. If your lender won't set it up for free, you can simply mail in a check for half of your payment amount every other week, with a letter instructing the lender to apply extra funds to the principal.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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