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Bi-Weekly Mortgage Loans

A bi-weekly mortgage can and will save you thousands of dollars in interest cost over the life of your loan. This happens because you amortize your loan faster and, in turn, you shorten the time it takes before you own your home free and clear.  Isn’t that a nice thought? Let’s say it again, free…and…clear!

Instead of making monthly payments, bi-weekly mortgages require a mortgage payment every other week.  For instance, let’s say your normal monthly payment was $1,500 per month, with bi-weekly programs, you would have to pay $750 every two weeks. If you do the math, you will see that you are making 26 bi-weekly payments per year which is the equivalent of 13 monthly payments per year (26 / 2 = 13).

It’s important to note that you can make more than your minimum bi-weekly payment with these program as well.  If you want to pay even more toward your mortgage, you can do so at any time.

A bi-weekly mortgage program does not have the same term as a normal 30 year mortgage even though your payment is traditionally based off of an amortization of 30 years.  On average, you will shave off about 24% of your payback time when set up with a bi-weekly payment plan from the beginning.  For instance, a 30 year fixed rate mortgage at 7.0% would be paid off in 23.7 years when following the bi-weekly program; that’s a savings of over $34,000 in interest per $100,000 borrowed!

Keep in mind that you do not have to use a bi-weekly program to make extra payments; if you have the self-control and drive to force yourself to make one extra payment per year, you can save just as much money as you saw above!  Lastly, it is important to realize that paying extra to your mortgage, no matter how you do so, can cost you income tax deductions in the future; when you pay less interest, you have less to write off!

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