The Low Down About Biweekly Mortgage Payments

The emergence of biweekly mortgage payments needs a better understanding. Primarily, when we talk about mortgage, we usually pay for it monthly. The typical mortgage is prepared so that you can have only one mode of payment each month for a sum of twelve months every year.

The smart thing about this kind of financial credit is that you have a fix amount to pay each month so you won’t be surprised about any payment changes and it’s easy to consider in your budget. But there is a good suggestion in order to give you a more intelligent way of paying your mortgage. Why not split up the monthly obligation and make it biweekly payments?

Amazingly, you could save tens of thousands of dollars for yourself and cut the long years off of your financial loan. Here’s how to do it.

The Magic of Biweekly Mortgage Payments

What’s wonderful about biweekly payments is the fact that there’s a 52 weeks in an entire year, therefore you’d have 26 total of payments. If you simplify these payments twice a month that would mean 24 payments in one year, so in reality the bi-weekly system gives you two extra payments each year. In short, it’s just the same us making one additional payment monthly. So how does it work, to be more specific? Here’s an example.

For instance, your present monthly payment for your mortgage is $1,000. In an entire year, you will pay out on twelve months of $12,000. If you make a decision to pay it biweekly, you turn the amount into $500 payment each 2 weeks. That’s counting the same, am I correct?

Well, if you multiply $500 to 26 payments you get a total payments of $13,000. The surprising thing is, that extra amount of $1,000 was directly applied to your principal, which means trimming down the amount you’ll spend on the interest and will complete your mortgage obligation faster.

To gain better understanding about genuine savings, on a 30-year mortgage of an amount $100,000 at 6.5% you’ll pay an interest of $127, 544 plus the principal $100,000, total of $227,544. Guess what? If you switch on to biweekly mortgage payments,it will result to $97,215 in interest, $30,329 amount of savings. Apparently, the bigger your mortgage, the interest rate will be higher also, and of course, greater savings.

Things to Consider in Making Biweekly Mortgage Payments

In a clear perspective, biweekly mortgage payments get the idea of dividing your monthly obligation in half and paying it every two weeks. But it’s not as simple as that. Though that is the general concept, you should check your lender first before taking the first step. Maybe, you have already established an automatic mode of payment and you want to ensure to stop that. Or else you might discover yourself even more burdened by additional payments.

Another thing, check out your lender whether they accept biweekly mortgage payments or not. While most financial lenders allow this mode of payment, others will not, or if they do, the extra payment might not be automatically applied to the principal. Look for a lender who will credit each biweekly payment upon receipt. If it happens that your lender credits your loan only if the second payment arrives, you won’t see the benefits.

Lastly, make sure that there is no penalty when you prepay your mortgage. These days, most mortgages don’t have a prepayment penalty, however there are still lending companies out there that will give you prepayment penalty if you try to pay off your mortgage early. It’s a sad reality, but true. Therefore, just be sure to avoid obtaining more burden than benefits by attempting to make additional payments.

What to Look out for When Making Biweekly Mortgage Payments

Paying your mortgage on biweekly basis is a very useful way for loaners, but you must be watchful of special programs or scams that claim they can do the process for you. There are some companies offering this kind of program, yet converting your monthly mortgage payment to even more extra payments. Avoid these unreliable offers.

Biweekly payments should not cost you anything to add up extra cash on your financial loan. It pays to become careful in money matters especially when paying biweekly mortgage payments.