At a Glance:

Paying your mortgage twice a month could be a good idea. After all, you can save on interest and you’ll be free of that big monthly payment sooner. Before you do that, check to see if your lender will allow it and whether it charges fees for processing extra payments or for prepayments.

If you own your home, chances are you’re making a mortgage payment each month. There are ways to pay off your mortgage faster, including making a larger payment or paying more than once per month. And maybe you’d love to get your home paid off faster and save money on interest, but you can’t afford to make larger or more frequent payments.

One method of paying off your mortgage involves dividing your usual monthly payment into twice-monthly payments, so you’re effectively not paying more.

Here’s a closer look at how paying your mortgage twice a month works, whether it can still help you pay off your mortgage early, plus an alternative.

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Paying Your Mortgage Twice Per Month

You have some options to set up this type of payment. You might be able to do this directly through your lender or by using a third-party bill payment service. You can do it on a schedule that pays twice per month, such as on the 15th and the last day of the month.

Say your mortgage is $2,000 per month. By paying $1,000 twice a month, or 24 times per year, you would make a total of $24,000 in payments – the same as you would if you paid monthly. But when you pay twice per month, you might be able to decrease the amount of debt that accrues interest each month by paying down the principal of the loan faster.

Paying Your Mortgage Every Two Weeks

If you really want to boost your mortgage payoff, consider paying every two weeks. In that case, you’d make $1,000 payments 26 times per year; that adds up to $26,000 by the end of the year. This means you’d be making what amounts to an extra mortgage payment each year.

Paying your mortgage biweekly can help you get ahead on your mortgage. It also means that during two months out of the year you’ll be making 1.5 times your monthly payment, so be sure your budget can handle it. You don’t want to have to raid your emergency savings account or go into credit card debt to cover your other basic living expenses just to pay your mortgage off faster.

Benefits of Paying Your Mortgage More Often

If you can get this system to work for you, not only can you save on interest, but you might also see a bit of a tax break if you claim mortgage interest as a deduction. You should talk to a licensed accountant to see what impact more frequent mortgage payments can have on your tax situation.

And, of course, if you choose to pay every two weeks, you can pay your mortgage off earlier by making an extra full payment per year. Over a 30-year mortgage, that’s 30 extra payments, totaling 2.5 years off the end of your loan.

Potential Issues to Watch Out For

Unfortunately, there are some pitfalls to this plan as well. Depending on the terms of your loan, you could see a prepayment penalty if you pay off your mortgage early. Talk to your lender to see what penalties exist, if any, before you start this plan.

If you use your lender’s payment plan for twice-monthly or biweekly payments and it uses a third-party payment processor, that company may simply hold your payments until it has the full payment to send—essentially defeating the purpose of paying more often. Third-party payment processors might also charge a high fee, which could also eat into your repayment strategy.

Things to Keep in Mind

Remember to check with your mortgage servicer to see whether it offers the option to pay more than once per month and whether it charges any fees to set up additional payments or issues a prepayment fee.

If you can’t set up biweekly or twice-monthly payments, but you can afford to pay a little more each month, consider dividing the amount of your monthly payment by 12 and add that 1/12 amount as an extra payment marked “apply to principal” – if your lender offers this option. This means it can be put toward the principal of the loan and not the compounding interest. At the end of the year, you’ll get credit for a full extra monthly payment, which can reduce your total loan repayment term.

Another great article by the National Mortgage News.

The mortgage industry is calling on the Consumer Financial Protection Bureau to revise its Loan Originator Compensation rule in favor of better protection for consumers and lesser regulatory burdens for lenders.

The Mortgage Bankers Association and nearly a dozen trade groups said that after more than five years under the LO Comp rule, changes to the order should be among the CFPB’s top priorities in its review of the mortgage rules, according to a letter sent to acting CFPB Director Mick Mulvaney.

“The LO Comp rule, while well-intentioned, is causing serious problems for industry and consumers due to its overly strict prohibitions on adjusting compensation and the amorphous definition of what constitutes a ‘proxy’ for a loan’s terms or conditions,” the letter said.

“These harms are felt when borrowers are unable to obtain lower interest rates from their lender of choice when shopping for a mortgage, or when lenders are unable to hold loan officers accountable for errors in the origination process. Consumers are also harmed when lenders limit their participation in special programs designed to serve first-time and low-to-moderate income borrowers,” the groups wrote.

Under the current law, a lender must choose between lowering the interest rate, discount points to match competition and declining to compete with other mortgage offers.

“The requirement to pay the loan originator full compensation for a discounted loan creates a strong economic disincentive for lenders to match interest rates,” the letter said. “For the consumer, the result is a more expensive loan or the inconvenience and expense of switching lenders in the midst of the process.”

Revisions would significantly increase competition in the marketplace, the letter said.

The CFPB should allow lenders to reduce a loan originator’s compensation when the originator makes a mistake, the letter states. Currently, the LO Comp rule does not allow companies to hold employees financially accountable for losses incurring from errors made on a loan.

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September 30, 2018

The rule also prohibits varying compensation for different loan types, including Housing Finance Agency loans. But, lenders should be allowed to adjust loan compensation to offer loans made under state and local HFA programs, the letter argues.

“HFA programs are particularly important for first-time homebuyers and low-to-moderate income families who are often underserved and face affordability constraints under market interest rates and terms,” the trade groups wrote.

Originally, the LO Comp rule was created to protect consumers from steering, which is pretty much a non-issue following newer regulatory actions adopted from the passage of the Dodd-Frank Act, according to the letter. The CFPB’s TILA-RESPA integrated disclosure rule also aimed to provide clarity on mortgage terms and costs by elevating disclosure requirements.

    Good morning, Jodie Tanga here with your Mortgage Minute. Today’s topic, Going Deeper with Your Credit Score Part 2.

    Here are some things you can do now, to start increasing your credit score:
    • Don’t ever make a late payment on your credit cards.
    • Make more than the min payment each month.
    • Try to stay under 30 percent of your credit limit.
    • Be aware of cards that promote low interest rates, keep track of when they are going to increase and any annual fees they may have .
    • Don’t open up too many lines of credit- you don’t want it to appear that you are in need of excess credit.

    Make sure you have at least two lines of credit, you don’t want it to appear you don’t have access to credit.

    For more information on your credit score, call us at the Tanga Mortgage Team powered by Pacific Rim Mortgage at (808) 223-2761 or visit us on the web at www.pacrimmtg.com.

    Maui had a small decline in the number of homes sold last month while median prices moved in different directions for single-family homes and condominiums.

    A new report from the Realtors Association of Maui said the median price for single-family homes sold on the Valley Isle in March declined 10% to $680,000 from $756,000 in the same month last year.

    Some of the drag on the median price was due to more sales in the Wailuku area where residences tend to be more midpriced. There were 25 homes sold in the area last month for a median $641,114 compared with 15 sales for a median $685,000 a year earlier.

    Maui

    Adobe Stock

    Overall, there were 100 single-family homes sold on Maui last month, down 5 percent from 105 a year earlier.

    In Maui’s condo market the median price jumped 15% to $450,000 last month from $390,000 a year earlier. Much of the increase was fueled by sales in Kihei where there were 56 sales last month for a median $416,000 compared with 45 sales a year earlier for a median $359,000.

    The number of condo sales slipped 5% to 127 last month from 133 a year earlier.

    The median price is a point at which half the sales were at a higher price and half at a lower price.

    Maui’s trade association for real estate agents counts sales of new homes and previously owned homes in its report.

    Great Article By Andrew Gomes from The Honolulu Star-Advertiser.

    Hawaii

    Real estate foreclosures declined in Hawaii for a fourth consecutive year in 2017, according to statistics from the state Judiciary.

    The number of new foreclosure cases filed statewide last year fell 16% percent to 1,461 from 1,734 the year before.

    Foreclosure lawsuits initiated mainly by lenders against homeowners in Hawaii peaked in 2013 at 3,430 cases. The decline began in 2014 when 2,084 cases were filed, and the next year new case volume decreased to 1,826.

    The four-year trend has been influenced by a prospering state economy where personal income has risen, unemployment has dropped about as low as it can go, and home values have appreciated moderately. Still, unfortunate life events including divorce, bad financial decisions and debilitating illness or injury can lead to foreclosure.

    Judiciary statistics on foreclosures go back only to 2010, though for that year many foreclosures by lenders against homeowners were conducted out of court in a nonjudicial process that homeowner advocates contended was unfair to borrowers. Since mid-2011, all foreclosure cases by lenders against homeowners have been filed in state court after the Legislature overhauled rules governing foreclosure in Hawaii.

    Cases filed in court can include actions against owners of commercial real estate and actions initiated by condominium associations against homeowners who fail to pay maintenance fees or other assessments. Condo association cases, however, also can be done through the nonjudicial process. Other foreclosure cases, including actions involving timeshare properties, are typically done through the nonjudicial process that isn’t counted in Judiciary data.