New Jersey is considering a legislative proposal that could help homeowners save significant amounts on their mortgage payments. The proposed bill, currently advancing in Trenton, would mandate all financial institutions in the state to allow homeowners to make biweekly and semi-monthly mortgage payments instead of a single monthly payment.
Assemblywoman Tennille McCoy, representing Mercer and Middlesex counties and serving as the bill's primary sponsor, explained that making half a mortgage payment every 15 days could result in roughly one additional payment per year. "That in itself would decrease your interest by $30,000, $40,000; it could also decrease your mortgage terms," she stated. The extra payment would be applied directly to the principal amount borrowed, reducing total interest paid and shortening the loan term.
James Hughes, an economist from Rutgers University and dean emeritus of the Edward J. Bloustein School of Planning and Public Policy, noted that this kind of payment schedule can be financially beneficial for homeowners. "They’ll be building up equity faster than if it were a monthly payment," he said. However, he cautioned that it is not an immediate solution for everyone as benefits may take years to materialize depending on the mortgage length.
McCoy emphasized that as a homeowner's mortgage balance decreases, their equity increases—providing financial stability and options for expenses such as college tuition or home improvements. "If you’ve got kids going off to college... these are the things pulling that equity out of your home [can cover] to help you with those particular expenses," she added.
Hughes remarked on the ease of this savings method: "It’s sort of a painless way of saving." He pointed out that few people have the discipline to consistently save portions of their salary for building equity.
The legislation also aims to prevent financial companies from penalizing borrowers who wish to pay more towards their principal balance. McCoy highlighted this aspect by saying, "By offering this flexibility it really is a measure that helps homeowners manage their cash flow more effectively."
