Paying Off That Mortgage Faster with Biweekly Payments
One way you can pay off your mortgage faster, and save money in mortgage interest charges, is to arrange biweekly payments. These are payments in which you make half your mortgage payment every two weeks. Here’s how it works:
Because the calendar does not have a set number of days for each month (ranging from 28 to 31 days each), there aren’t a set number of weeks, either. There are 52 weeks in year. This means that if you are on a biweekly schedule, making a payment every other week, you will make 26 payments in a year. Divide that by 2, and you get how many “monthly†payments you will be making: 13. But there are only 12 months in a year. So by making your mortgage payments on a biweekly schedule, you are actually making an extra payment each year.
The main benefit of such a practice is that you can knock off between 5 and 8 years of your mortgage term (depending on when you start) simply by switching to biweekly payments. And you will save thousands – probably even tens of thousands – of dollars in mortgage interest charges. You will also build equity (or “ownershipâ€) in your home faster, since you will be putting more toward the principal each year.
Some things to watch out for with mortgage biweekly payments
As always, there are some caveats to paying off your mortgage faster with biweekly payments. First of all, you should find out if you will end up with a pre-payment penalty. Most of the time, your savings will still be greater than the penalty, but it is a good idea to make sure.
Another thing to be aware of is the fact that some mortgage lenders charge a fee to set up a mortgage on biweekly payments. Again, the savings are usually worth the fee, but you should carefully weigh your options to makes sure. Related to that enrollment fee are transaction fees. Some mortgage lenders charge a transaction fee every time money changes hands. So you might find yourself slapped with fee each time you make a payment
Thoroughly check your mortgage lender’s policies on mortgage loans with biweekly payments. Then see if such an arrangement will work for you.
Tags: paying off mortgage, paying off mortgage faster, mortgage loan blog, mortgage biweekly payments,
mortgage interest, mortgage lenders, prepayment penalty
October 29th, 2007 at 9:21 am
[…] biweekly on your home mortgage. Instead of a monthly payment, consider a biweekly home mortgage payment. You make payments every other week, resulting in what amounts to one extra payment per year. This […]