What Advantage Is There With Mortgage Plans That Have Bi-weekly Payments
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
The Benefits of Choosing a Bi-Weekly Mortgage Payment Plan
Some mortgage companies offer the option of making bi-weekly payments, allowing you to pay off your mortgage faster. While it may not be ideal for everyone, here are some key reasons to consider a bi-weekly mortgage payment plan.
How Bi-Weekly Payments Work
A true bi-weekly mortgage plan involves making payments every two weeks, with each payment being half of your monthly mortgage amount. By doing this, you effectively make 13 months' worth of payments in just 12 months. This system can help prevent late payments thanks to its automatic nature.
Impact on Interest
The timing of payment application is crucial. Ideally, you want your lender to apply payments on the day they are received, significantly reducing the interest you owe. However, some lenders delay applying your payments, which prevents you from maximizing your interest savings. Opt for a lender that credits payments immediately to ensure the best results.
Potential Savings
By choosing a bi-weekly plan, you could pay off a 30-year mortgage in roughly 18 to 22 years, potentially saving about $34,000 for every $100,000 owed. Making extra payments manually can achieve a similar effect but typically won’t yield the same level of savings.
Building Equity
Bi-weekly payments not only save on interest but also help build home equity faster. This strategy can be a great financial benefit, enhancing your home’s value over time.
Switching to a Bi-Weekly Plan
If you already have a mortgage, switching to a bi-weekly plan might not be straightforward. Some lenders don’t offer this option or may require you to refinance, incurring fees. Additionally, the interest rate might be slightly higher due to the lender’s increased workload. Always compare fees and offers before making a decision.
Conclusion
Bi-weekly mortgage payments offer a practical way to reduce interest costs and build equity swiftly. If considering this option, ensure you fully understand the terms and choose a lender that uses your payments to your advantage. Evaluate all fees and conditions to make an informed choice that fits your financial goals.
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