If you've ever looked for a mortgage loan then you're well aware that the loan interest rate can make an emormous difference in your monthly mortgage payments. But did you know what an enormous difference even a tiny difference in that rate can make regarding the total interest you'll be paying over the life of the loan?



For instance, if you take out a 30 year loan for $100,000 at 6.5% (fixed) you'll have paid a total of $127,544.49 in interest by the time you've paid off your loan. But if %your interest rate had been 6.25% the amount would be $121,658.19. That's a savings of $5,886.30 for a rate difference of only 1/4%!

Now what if you could cut that interest rate even more? Taking the same 30 year loan for $100,000 at 6.5%, here's how much you could save %by further cuts in the interest rate%.

Rate = 6.0% .... Point Reduction = 1/2% ...Savings = $11,706.3

Rate = 5.75% ... Point Reduction = 3/4% ...Savings = $17,458.26

Rate = 5.5% .... Point Reduction = 1% .....Savings = $28,751.16

So by lowering the rate by a full point, you would get to keep a whopping $28,751.16! But the question is HOW can you bring about dropping the interest rate on your home loan?

Well, you could refinance your loan to get a lower rate. But doing that has its drawbacks.

to begin with, to get a lower rate you would be compelled to refinance %at a time when the current interest rates% are lower than the rate you pay now. But if current interest rates are the same or higher, then you would need to delay until rates go lower ... and that could be a long wait!

Also, if you refinance you'll have to pay hundreds of dollars in closing costs. Plus it's likely you'll have to change lenders and you'll have to deal with complicated forms and a stack of documents you must put your signature on.

But what if there were a way to lower your interest rate by one full point and not increase your monthly payment ... WITHOUT the disadvantages of having to refinance?

By changing to a "biweekly mortgage payment" you can cut your "effective interest rate" without the expense or hassle of refinancing.

Let me explain why.

The "effective interest rate" can be understood as the ACTUAL interest you're paying on your loan. I'm sure you're wondering, "How can the actual interest rate be lower than the interest rate I'm supposedly being charged?" To illustrate let's return to our first example, the $100,000 loan at 6.5% over a 30 year term.

The loan papers you signed when you took out the loan state "6.5%" is the interest rate you would pay. And if you pay once a month like most people, you'll pay a 6.5% rate. Now if you switch to a biweekly mortgage payment you will be reducing your actual rate.

At 6.5% your monthly payments would be $ 632.07 (not including escrow for insurance and taxes). Now let's take that $632.07 payment, and instead of paying it once every month, we'll pay HALF that amount ($316.03) once every two weeks. The result? Hang on, because this will floor you!

Your mortgage will be paid off in just over 24 years (not 30) and the total interest you'll have paid will be $99,549.65 ... that's $27,994.84 LESS than you would otherwise have paid. And because you paid less interest it makes your ACTUAL interest rate just 5.22% ... more than a full percentage point less. Let's state it differently. The total of your interest paid is the same as if you had taken out a $100,000 loan for 30 years at only 5.22% interest, and made regular payments every month.

Now what if your loan had been for more (or less) than $100,000? The "Effective Interest Rate" of 5.22% would not have changed. But the larger your own had been, the less interest you would have had to pay by going to a biweekly mortgage payment.

What if your loan had been for $200,000? You'd have saved $55,989.68. How about $500,000? You would have pocketed a whopping $139,974.20.

Now what if you've already been paying on your current loan for a number of years?

Taking our previous example ($100,000, 30 years, 6.5%) let's say you been making payments for 10 years, then you switch to a biweekly mortgage payment. You could still bank an extra $10,342.04. So while let's not as much as $27,994.84 it would still make it more than worth your while to switch to a biweekly mortgage payment.

There are additional advantages to change to a biweekly mortgage payment plan.

* All payments fall on the same day of the week. So if you get paid on a Thursday, you can make every biweekly mortgage payment fall on "payday."

* You can structure it so that your payments are automatic, so you'll never have to make a manual payment nor remember when to pay.

* You'll pay your loan quicker and be debt free sooner.

* You'll be making your mortgage into an investment program

* You'll be building equity in your home up to 3 times faster!

So when you make your next mortgage payment, stop and think over how much money you could be keeping by switching to a biweekly mortgage payment ... money you could save and spend on YOUR family, and not someone else's!