All About Bi-Weekly MortgagesPosted on: April 20, 2010
The bi-weekly mortgage program is an excellent way for people interested in paying off their home mortgages in less time than the traditional thirty year allotment. I is ideal for those who did not qualify for a standard 15 year mortgage offering homeowners more convenience and flexibility.
How Does Bi-Weekly Mortgage Work?
The advantage to a bi-weekly mortgage program is that allows the homeowner to split up the monthly payment, making a half-payment every two weeks instead of one full payment every month. When using bi-weekly payment, a total of 13 full payments due within a given year, rather than the traditional 12.
By choosing this option to finance your home mortgage, you pay one extra payment a year. Each extra payment is applied to reducing the principal balance of the home loan, which includes the balance of future interest calculations. As the principal reduces, it also reduces the total interest paid and time allowed to pay the home loan.
What are the Benefits of Bi-Weekly Mortgage?
The benefits of choosing a bi-weekly payment program is that it increases the total equity invested of your home and allowing you to become debt free more quickly. With this home mortgage payment system, a person saves money by paying less interest on the mortgage and lowering the payments bring down the balance of the principle loan quicker. Normally, a bi-weekly system will pay off mortgage in full, 7-10 years earlier, on a standard 30-year mortgage, than a monthly plan. In addition, homeowners can feel confident that they are making progress in their effort to get out of debt with the extra payment being applied to the principle each month resulting the loan balance decreasing.
How to Get Started with a Bi-Weekly Mortgage System
The first step is speaking to a lender about switching over to the bi-weekly payment program, typically there are limited fees, is any, when making the switch from a standard mortgage payment system to a bi-weekly payment system. An automated payment system can be set up and if you already have one for a full payment, adjustments need to be made to avoid making two payments. A lender must be willing to credit each half month payment immediately after received, otherwise the benefits of bi-weekly payments will never be seen. Sometimes penalty fees occur for mortgage prepayments, however this is rare today, but sometimes still occurs. Be sure to ask your lender if any penalty applies if a person drops out of the program. Sometimes, people find they cannot afford the extra payment or the bi-weekly commitment during tight economic times, resulting a person to drop out of the program. Watch out for any “special offers” advertised through the mail or telephone. Unfortunately, there are many scams claiming to offering a bi-weekly plan for a one-time fee. To protect yourself against fraud or theft, make sure you do the appropriate research and only work with a reputable mortgage broker.