Paying off a mortgage is a long-term commitment that requires discipline and careful planning. Many homeowners find themselves overwhelmed by the amount of money they need to pay each month, especially if they have a 30-year mortgage. However, there is a way to reduce the interest you pay and pay off your mortgage faster – biweekly mortgage payments.
What are Biweekly Mortgage Payments?
Biweekly mortgage payments involve paying half of your monthly mortgage payment every two weeks instead of making a full payment once a month. This means that instead of making 12 full payments a year, you will make 26 half payments, which adds up to 13 full payments. By doing this, you can save money on interest and pay off your mortgage faster.
How Do Biweekly Mortgage Payments Work?
To set up biweekly mortgage payments, you will need to contact your lender or mortgage servicer and request to switch to a biweekly payment plan. Once you are enrolled in the plan, your bank will automatically withdraw half of your mortgage payment from your bank account every two weeks.
It’s important to note that some lenders may charge a fee for setting up a biweekly payment plan, while others may not. It’s also important to make sure that your lender is applying your payments correctly, as some lenders may hold your payments until the full amount is received. So, working with your Loan Service/Lender is very important.
Benefits of Biweekly Mortgage Payments
There are several benefits:
1. Save Money on Interest
By making payments every two weeks, you can save money on interest over the life of your mortgage. This is because you are paying more frequently, which reduces the amount of interest that accrues.
2. Pay Off Your Mortgage Faster
You may also pay off your mortgage faster. By making an extra payment each year, you can reduce the principal amount of your mortgage, which means you will pay less interest over time.
3. Build Equity Faster
As you pay off your mortgage faster, you will also build equity in your home faster. This can be beneficial if you ever decide to sell your home or refinance your mortgage.
4. Improve Cash Flow
With smaller, more frequent payments, you can improve your cash flow. This is because you are making smaller payments more frequently, which can help you manage your monthly expenses more effectively.
Are Biweekly Mortgage Payments Right for You?
This option may not be the best for everyone. Here are some factors to consider before deciding whether to switch to a biweekly payment plan:
1. Your Budget
If you are on a tight budget, making mortgage payments around twice per month may not be feasible. It’s important to make sure that you can afford to make the extra payments before you enroll in a biweekly plan.
2. Your Interest Rate
If your interest rate is already low, making biweekly mortgage payments may not be worth it. It’s important to calculate the potential savings before you switch.
3. Your Mortgage Terms
Some mortgages may have prepayment penalties, which can make it more expensive to pay off your mortgage early. It’s important to check your mortgage terms before you make a decision. Your Lender can provide the info you need, just give them a call.
Conclusion
Biweekly mortgage payments can be an effective way to save money on interest and pay off your mortgage faster. By making an extra payment each year, you can reduce the principal amount of your mortgage, which means you will pay less interest over time.
Before deciding whether to switch to a biweekly payment plan, it’s important to consider your budget, interest rate, and mortgage terms. This type of mortgage plan may not be the best option for everyone, but they can be a great way to save money and pay off your mortgage faster if you can afford to make the extra payments.
If you’re interested in switching to a biweekly payment plan, contact your lender or mortgage servicer to learn more about the process and potential savings. With careful planning and budgeting, you can enjoy the benefits of biweekly mortgage payments and achieve financial freedom faster.
Looking to change your mortgage term?
Take steps today to shorten your term to a 20 or 15 year, save thousands in interest, and own your home sooner!
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