Could You Save Money With BiWeekly Mortgage Payments?
Mortgage payments are normally paid monthly with payments due on the first of each month. Some advisors will suggest you make your payments every two weeks versus monthly. This article will detail out the effects of this.
By making your payments every two weeks you effectively are making one extra payment over the course of a year. The impact of doing this will result in an acceleration of growing your equity in the house by paying the principal down faster and resulting in you paying less in interest. There is little downside unless you have any type of prepayment penalty on the mortgage. Typically, most conventional mortgages today do not carry a penalty.
Make certain you are not detracting from any other savings goals you may have as well. Most servicers will allow you to set up a biweekly payment plan so once you set it up, you can forget about it. Remember, you can normally send in extra money at any time to be applied to principal. You can accomplish the same thing by making one extra payment sometime during a year.
Remember to work closely with your mortgage servicer to ensure you set up the biweekly payment plan correctly. There should not be any additional fees to do this and make sure any extra money is applied to principal. For instance, if you made 1 extra payment each year on a 30 year fixed mortgage, you will cut 7 years off your mortgage term.
As always, consult your trusted mortgage advisor to learn more about your options.