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Payment Plans for Your Mortgage

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Taking out a mortgage is often an inescapable part of the home-buying process. It is a long commitment, involving between 15 and 30 years of monthly payments until it is finally paid off. While there might not be too many ways to get out of paying your mortgage, there are a number of different methods of paying it. Some methods will save you money, and others will allow you to pay the mortgage off more quickly.

Biweekly plans

Instead of making that monthly mortgage payment, you may be able to pay your mortgage every other week. While you would normally make 12 payments per year, your monthly fee can be paid in half-payments every other week. Since there are 52 weeks in a year, you will end up making 26 half-payments per year, rather than the 12 full payments or 24 half-payments you would by paying monthly or bimonthly. This means that you will be paying an extra month's worth every year, shortening the amount of time it takes to pay off the mortgage.

Despite the benefit of getting your mortgage paid off sooner, there are some downsides to the biweekly payment method. For one, if you choose to do so, you will have a higher interest rate during the term of your loan. At the same time, if you hadn't originally planned on paying your mortgage biweekly, your lender might not allow you to change your payment plan.

Mortgage accelerator

Though mortgage accelerator programs have been popular in the United Kingdom and Australia for a long time, they have only recently gained popularity in the U.S. The mortgage accelerator involves financing the mortgage through home-equity lines of credit. This entails depositing your paychecks into a special account that will automatically apply your money toward your mortgage payments. While you would still have access to this account to pay bills or take out cash, any unspent money goes directly to the mortgage.

If things go according to plan, you will pay off the mortgage more quickly, since you would be making larger payments. While there certainly are some benefits to this plan, it may just work better on paper. For instance, you need to be sure that you receive enough income to cover the monthly cost of the payment as well as your living expenses. Also, the plan assumes that the interest rates will stay the same, but that isn't the case with all mortgage accelerator plans. You should also be aware that, unless you begin your loan on one of these plans, you could be charged high start-up fees or interest rates. But, if you have the income and confidence that you won't live outside your means, an accelerator mortgage program can be worth your while.

Paying mortgage with a credit card

You may be surprised to learn that you can, in fact, use a credit card to make your mortgage payments. According to thefinancebuff.com, there are many third-party programs that allow you to pay your monthly mortgage payments with a credit card, though you are likely to face extra fees on top of each payment. However, some lenders may allow you to use your card directly to make mortgage payments.

The benefit of using a credit card to pay your mortgage is pretty simple. Basically, by doing so, you can have the card automatically pay the lender, and then you just pay the monthly credit card bill. This ensures that your payments are done on time, and gives you more flexibility planning your monthly expenses. For instance, if your monthly payment is due on the first of each month, it can be charged to your credit card. Then, you will just have to pay the credit card bill whenever that is due, which might not be until the middle of the following month. By making your mortgage payments like this, you are essentially giving yourself an interest-free loan each month. In order to pay off your mortgage this way, you will first need to get an FIA Card Services credit card. Such cards include Fidelity Investment Rewards Visa, Fidelity Retirement Rewards American Express, and Schwab Back Invest First Visa.

It is recommended that you consult with a financial adviser, as well as your lender, before committing to any of these plans. Since a mortgage is the biggest loan you'll ever face, you want to make sure that you get the payment plan that is best for you and your budget.

Photo by: Stuart Miles (Freedigitalphotos.net)

Adam Mandelbaum  Posted by Adam Mandelbaum on May 14, 2010

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