The amount of money borrowed on a loan.
A mortgage accelerator program helps you pay off your Glossary Term: mortgage faster. This option can reduce the amount of Glossary Term: interest you pay. It can also reduce the duration of your loan by a number of years.During the early part of the loan’s term, more of your monthly payment is applied toward interest expense. By paying a little extra toward your Glossary Term: principal every month, you could reduce the duration of your loan and save significantly on the amount of interest you pay over the life of the loan.
A common mortgage accelerator strategy is to make one-half of your regularly scheduled monthly mortgage payment every 2 weeks instead of one payment each month. This helps in 2 possible ways: First, depending on your lender, the principal may be credited to your account faster, so you’d pay less interest. Second, you’d end up making 26 payments per year, the equivalent of 13 months—it’s like making an extra payment each year.
There are 2 ways to undertake a mortgage accelerator program: use a lender enrollment program or set up your own payment plan.
Your Glossary Term: lender might offer enrollment in a bi-weekly payment plan as one of the terms of your home loan. This could be a hassle-free way to contribute more toward paying down the principal on your home, especially if you make automated mortgage payments. Some lenders charge administrative fees for certain plans. Make sure you understand the details of the plan.
If you can afford to make additional principal payments, you could save a lot of money in interest in the long run. But before you implement your own plan, here are a few things to consider: