How To Save Thousands in Interest on Your Home Mortgage!
 by: Sameer S Panjwani

So you have a mortgage on your home or planning to get one? Here’s something to consider if you want to reduce your interest payment and save on thousands of dollars. Consider going in for a bi-weekly mortgage payment plan.

So, what is a bi-weekly mortgage payment plan? The difference in this type of mortgage plan lies in the frequency of payments. Out here you make your payments every two weeks instead of every month. By going in with such a payment plan, you end up paying for the 52 weeks in a year, i.e. 1 month more than the otherwise 12 payments you would make with the monthly plan (52 / 4 = 13 payments in a year). You may think why pay extra? But the benefits are there for all to see. By going in for such a mortgage plan, you are reducing the tenure of your loan as well as continuously reducing the principal and interest which has to be repaid.

An illustration to show what we mean – Suppose you were to go in for a mortgage of $150,000 for a term of 360 months at an interest rate of 6%, your monthly payment would work out to $899.93 and your total interest through out the tenure of the loan would work out to $173,757. Now consider the same mortgage taken on a bi-weekly payment plan. Your bi-weekly payments would be of $449.67 while your total interest for the entire tenure would work out to only $135,294 + you end up completing the loan in 24 years instead of 30. Huge difference!

The savings from such a payment plan are huge and are worth considering if you can afford to make the payments every two weeks. At least, keep it as an option!

About The Author

Sameer S Panjwani is the CEO and Founder of ChoiceOfHomes.com – Find Homes for Sale and Apartment Rentals.The website is a useful resource of Home Listings, Articles and Information related to real estate. Visit http://www.choiceofhomes.com.

That dreaded time has come at last for many big spenders. As credit card bills roll in this month, the impact of swiping those credit cards to purchase holiday gifts will slowly begin to sink in.

Shoppers who relied on plastic to pay for holiday gifts spent an average of $896 last holiday season, according to a Consumer Reports poll of over 1,000 consumers. While 40 percent said they planned to pay off the debt by the end of January, about 19 percent said they may not be in the clear until March or later. As of October 2009, the national average credit card borrower debt was $5,612, according to TransUnion, one of the three consumer credit reporting agencies in the United States. With the new year in full swing, there are many ways to get out of the red and into the black. Here are just a few tips from financial experts.

[See 21 Things We're Learning to Live Without.]

1. Pay off high-interest-rate credit cards

If you have several credit cards, pay off those that have the highest interest rates first, says Loren Bendele, CEO of Savings.com. “Short-term pain for long-term gain,” he says. He encourages consumers to pay the full balance, or as much as possible, for these high-interest credit cards and then pay at least the minimum balance for the remaining credit cards.

2. Contact your credit card companies

Bendele also recommends asking all of your credit card companies whether they can offer you a lower interest rate or a lower monthly payment. “Tell them you want to reduce your interest rate or else you will move to another credit card company,” he says. “Start aggressive. Don't cancel the card just yet, but see what they can do.”

3. Make the minimum monthly payments

If you can't afford to pay off the bill in full each month, try to pay at least the minimum required for each credit card, recommends Steven Katz, the director of consumer brands at TransUnion. This will reflect well on your credit report.

4. Pay bills on time

Pay each of your credit card bills on time to avoid late fees. Every time you miss a payment, it affects your credit report, Katz says. “If you have a late payment, that will stay on your credit report for seven years,” he says. “While the impact of this late payment will diminish over time, it will still be there for seven years, so it is critical that you don't let that happen.” One way to ensure you make your monthly payments on time is to make them automated, he says.

5. Check your credit report

Go to AnnualCreditReport.com to get a free credit report once every 12 months from the three consumer credit reporting agencies–TransUnion, Experian, and Equifax. Additionally, all three of these agencies offer similar subscriptions for around $14.99 per month that allow consumers to access their credit reports at any time throughout the year. “Look at your credit report frequently in order to make sure it is an accurate and complete reflection of your credit history,” Katz says. This frequency will also allow you to detect if you have become a victim of fraud, he says.

6. Keep your credit utilization low

Try to keep the utilization of your available credit under 35 percent of the credit limit, Katz says. For example, if your credit limit is $10,000, try to spend less than $3,500 each month in credit on that card, he says. “When a lender is looking at you to provide credit, they will pull a credit report from all three credit agencies and choose a scoring model. Generally speaking, they will reward a utilization that is less than 35 percent,” Katz says. If you are spending over that amount, you should work yourself down to pay off as much as possible.

7. Know your “VantageScore”

In 2006, all three credit agencies helped to create the VantageScore, which is a very consistent credit score across all credit agencies, says Susan Henson, a spokesperson for Experian. The VantageScore provides a letter grade along with a number score to help consumers better understand their credit score and know what to expect when they go to a lender, Katz says. However, be aware that some creditors may not report to all of the credit agencies, as it is voluntary, so the VantageScore could vary slightly from one credit agency to another, Henson says. TransUnion and Experian offer the VantageScore on their websites.

8. Find zero-interest-rate credit cards

Bendele also recommends transferring credit card debt to zero-interest credit cards, such as the Discover More Card, which offers zero interest for 12 months and no annual fees. These low-interest credit cards help consumers consolidate their debt onto one card, therefore saving them money on interest rate fees.

9. Debate about closing a credit card

Katz says closing a credit card can actually backfire on you. It can affect your credit utilization, which is calculated by how much total credit is available to you, he says. By closing the card, you are lowering your total amount of available credit, while you are still using the same amount of credit. In the short term, this will raise your credit utilization, which can hurt your credit score. If you do close a card, don't close one you've had for a long time that has a positive credit history because this positive history will eventually fall off your credit report. Close a credit card with a shorter credit history, he says. Bottom line: Unless your credit card carries an annual fee or a fee for lack of use, Katz recommends against closing your credit account. Instead, just cut up the card or stop using it.

10. Set a budget, and stick to it

Cut out small luxuries such as Starbucks or other unnecessary purchases that can add up in the long run, Bendele says. Put these savings toward paying off your credit card debt. He recommends creating a budget and then recording all of your expenditures to make sure you know exactly how you are spending your money. He also suggests setting and tracking budgets online at websites such as Mint.com. One final fun tip Bendele recommends for spenders with itchy fingers yearning to buy on credit is to put the card in a glass of water and place it in the freezer. This will prevent you from making hasty purchases because you have to let it thaw, giving you time to make sure you need to use it. “Debt is very draining, and everyone who's been in it knows it. Work towards making this year stress free by getting out of debt,” he says.

[See 17 Ways Consumers Are Changing.]

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