How to Divide a Mortgage Payment
- 1). Determine if your mortgage company accepts different frequency of payments. You can make monthly payments on your mortgage account. Some mortgage lenders give you the opportunity to pay on the 1st and 15th of the month, or biweekly. When you pay in one of these manners, you actually make an additional principal payment during the course of the year. This will save you money in finance charges over the course of your loan--possibly thousands of dollars. Depending on the size of your loan, you can probably cut a significant amount of years from the term.
- 2). Send in the documentation. When you first sign your mortgage documents, you will receive a welcome letter in about two weeks. A form will be included that allows you to choose the method that's the most efficient and effective for you. Making payments in this manner can help some households manage their budget more efficiently. The form will also explain how your payment will be divided, depending on which method you select. You will know the exact dollar amount paid each time a payment is made.
- 3). Wait for the process to begin. From that point on, you will see how your payments are divided when you get your monthly statements. This process is not permanent and can be canceled at any time. If you decide you no longer want your payments divided in this manner, contact your lender and it will provide you with instructions about canceling the process. When payments are taken out automatically, you don't have to worry about paying late.
- 4). Calculate how your payment is divided without an escrow account. If you pay your own taxes and insurance, then you won't have an escrow account. Your payment will be divided between principal and interest. If you have a mortgage balance of $100,000, a mortgage payment of $700 and an interest rate of 7 percent, you can see how your payment is divided. The first month's interest is calculated by dividing the interest rate by 360, multiplying by the number of days in the billing cycle (30), and multiplying by the outstanding balance of $100,000. The interest you pay for the first month will be $583.20, and your principal payment will be $116.80. As you continue to make payments, more and more of your payment will start to go toward the principal balance.