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EMPP (Early Mortgage Payment Program) is offered by most financial institutions that sell mortgages. Because it saves the purchaser tons in interest it is only mentioned once at the signing of the loan. It's a great program if you can afford to utilize it.

The following three paragraphs explain how EMPP works in your favor:

The mortgage has to be paid one month in advance. From that point you pay half the mortgage every two weeks. By doing so a lump size portion of the payment goes toward the principal thereby lowering the balance of the loan. It is suggested that a 30 year mortgage using this method could be paid in full in fifteen years.

To clarify further say the mortgage balance is $100,000, the payment is $1200 with an interest rate of 4%. Insurance premiums are tacked in. This is your first home so the bank demands you carry PMI (Private Mortgage Insurance) the first five years at 1% of the payment balance. Now subtract the 4 %( 30 days) = $328 and say about $200 for the escrow balance, the 1% of the payment adds up to $12. Subtract all these amounts from your agreed payment, $540. In essence only $660 is applied to the principal the new balance of your loan is $99340.

To become involved in the EMPP you have to pay ahead one month $1200. Your new mortgage balance is $98140. The first half of the payment is made subtracting 1% = $12, 4% interest calculated from the last payment date (15 days) $161 and insurance at $200 adds up to $373, the remaining $227 goes to principal lowering the mortgage to $97913. The other half of the mortgage ($600) goes to principal. Your new mortgage balance is now $97613.

When money is applied to principal on any loan lowering the balance, the interest amount is calculated on that lowered amount. But be careful. If you miss a payment the reverse happens. Interest is compound daily and the adverse affect is more of your dollars are being collected as bank revenue than going toward the principal of your loan.

Entering the program with a 30 year fixed loan, easily it can be paid in full within fifteen years saving tons in interest and upping your credit score.

The hard part in today's economy unfortunately is having the funds available to pay the mortgage one month ahead and continue to pay half the mortgage every two weeks thereafter taking in consideration of other bills such as food, gas, phone, lights, car notes and other general living expenses.

One suggestion is instead of banking or spending your income tax refund, contact your bank and opt in to the EMPP.

It's a recommendable excellent program for all but few can afford to join. Speak with your local branch representative to gather more information. Seriously consider working toward joining.

Learn more about this author, PC Marks.
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