What is a Biweekly Mortgage?
A biweekly mortgage is a home loan in which the borrower pays half the monthly payment every two weeks. The rationale for this type of loan is that it allows the borrower to pay the mortgage off faster. Instead of making 12 monthly payments per year, the borrower actually makes 26 half-payments because there are 52 weeks in a year. By making biweekly payments, the borrower actually pays the equivalent of 13 monthly payments every year. The benefit of this payment plan is that by paying more every year, the borrower can realize savings on the total amount of interest paid because the principal of the loan is paid off faster. Depending on the size of the loan and the interest rate, borrowers can reduce the repayment period by several years and save thousands of dollars in interest. For owners who do not plan to stay in a home for more than five or six years, there is no real benefit in adopting the biweekly mortgage. Another benefit of the biweekly mortgage for some borrowers is convenie
If done correctly, biweekly mortgage payments can save you substantial amounts of money. The idea is based on the fact that a monthly mortgage means you make 12 mortgage payments a year. But on a biweekly schedule, you will end up making the equivalent of one extra monthly payment each year. Most lenders charge a fee for borrowers to convert to a biweekly payment plan. Also, not all lenders apply mid-month payments to the loan balance when the payment is received; some hold them in an account and apply payments only once a month. In this scenario, you are gaining nothing over sending in one check, and you are paying a fee for this privilege. Read the agreement very carefully and watch out for scam artists or lenders with contracts that do not stipulate that they will apply the money to the principal when it is received. Here are some of the benefits of a biweekly mortgage schedule: • You will pay off your mortgage faster. A 30-year mortgage will be paid off in about 22 years. • You wil
What is a biweekly mortgage plan anyway? Simple, it is just paying your house bill on a different schedule. Rather than making your entire payment at the end of the month this payment is broken in half and paid every two weeks. Even though your mortgage interest may be 6% (for example) you will end up paying more than 60-70% in interest throughout the life of your 30 year loan? If you have a $200,000 home loan the interest would end up being $120,000-140,000. The money you save by using the biweekly plan comes from paying less interest on your loan. Here’s an example scenario. You make a schedule of making your bi-weekly payment on a certain day of the week, we’ll say Friday just for example. Lets say your current monthly payment is $1000. This will make your biweekly payment $500. On some months there will be 5 Fridays. These months you will make three $500 payments. This will happen approximately twice a year. By continuing this schedule you will pay off your mortgage in about 3/4ths
