How to pay your Mortgage Bi-Weekly
Posted: May 08, 2014
All loans are setup to collect a payment from you once a month. That means you are making 12 payments each year. Interest is added to your loan based on the balance you owe and the rate per your original contract. So, for example, If you have a loan for $100,000 and your interest rate is 4% for the first month you are going to add to your balance $400.00 or 4% of the $100,000 loan balance. Each month you’ll add 4% of whatever the remaining balance is. If you really want to save your thousands of dollars and cut years off your mortgage you want to reduce the principal balance so the interest charges are less.
How does it work?
There are 12 months in a year, and in every year there is 52 weeks. If you pay mortgage payment with a Bi-Weekly program you pay 26 payments of one-half your payment instead of 12 regular payments. This results in two additional half payments each year or one full payment. The extra payment goes towards the principal of the loan. By reducing the loan balance the homeowner is also reducing the interest charges. By paying like this your loan will have less interest costs and the term of the loan will be reduced.
How much you can save?
On a $200,000 mortgage at 5%, you'll cut the total term by about five years and shave off more than $34,000 in interest costs. This is not some magic formula. Rather, it’s careful and diligent planning which achieves a reduction of the principal balance.
Most lenders won’t accept a Bi-Weekly payment. They want to process your mortgage payments on a monthly basis.
Do it yourself Biweekly Payments
If the lender does not allow homeowner for Bi-Weekly program but the homeowner is interested in paying the loan off early, then he can open a bank account and he has to made arrangement for the mortgage payments to come out every month in two bi-weekly payments. And at the end of the year, the homeowner can write a check on the account for an amount that will be the same as the monthly payment and sent into the lender. Or, a customer can simply pay extra payments throughout the year. However, the easiest way is to contract with a Bi-Weekly Payment Program and let that company manage this account for you. The results will be achieved by following the program and for the small cost of enrollment you can achieve substantial results.
Myth for Biweekly Payments
Paying your mortgage twice a month gives you better credit: This is wrong, bank often use an automatic bank draft, which means all your mortgage biweekly payments will be made on time. But if you want you can get the same effect on a monthly payment plan using automatic bank draft.
Advantage of Mortgage Biweekly Payment
Below are the few things which Biweekly payments can do
The Homeowner will pay mortgage amount faster. A 30 years mortgage can be paid off in 25 years.
Through biweekly payment equity will build in the home more quickly.
The homeowner will save thousands of dollars if he will go for biweekly payment plan.
Payments will be directly taken from homeowner’s bank account.
You may contact Mitch Lichterman at email@example.com or visit the website by clicking this link Bi Weekly Mortgage Program