Many homeowners constantly look for ways to save money and repay their mortgages faster. Paying your mortgage twice a month as opposed to the customary once a month is one tactic that has gained popularity. But does this method truly offer financial benefits, or is it just a mortgage myth?.
Ever dream of owning your home outright free from the shackles of a hefty mortgage? Well brace yourself for some financial wizardry, because biweekly mortgage payments might just be your magic wand.
By using this strategy, your monthly payment is divided into two parts and is due every other week. It sounds easy enough, but the real trick is the additional payment you wind up making annually, which shortens your loan term and saves you a ton of interest.
Unlocking the Savings Potential
Let’s break down the math. A traditional 30-year mortgage with a $350,000 principal and a 6.5% interest rate would cost you a hefty sum over time. But with biweekly payments, you could shave off a whopping five years and nine months from your mortgage, translating to a staggering $100,000+ saved in interest!
Here’s the breakdown:
| Payment Method | Total Payments per Year | Interest Saved |
|---|---|---|
| Monthly | 12 | $0 |
| Biweekly | 26 (13 full payments) | $100,000+ |
As you can see, the extra half payment each month adds up to a significant reduction in your overall interest burden. It’s like chipping away at a mountain, one pebble at a time.
Is Biweekly Right for You?
While biweekly payments sound like a financial superhero, it’s important to consider your own circumstances. Here are some questions to ponder:
- Can you afford the extra payments? Biweekly payments mean shelling out more money each month. Make sure you can comfortably manage this before diving in.
- Does your lender allow biweekly payments? Not all lenders are onboard with this strategy. Contact them to ensure they accept biweekly payments and credit them correctly.
- Are there any fees involved? Some lenders charge a fee for setting up biweekly payments. Factor this into your decision.
Alternatives to Biweekly Payments
If biweekly payments aren’t your cup of tea, don’t fret! Here are some other ways to chip away at your mortgage:
- Make an extra payment each year: Even one extra payment annually can significantly reduce your interest burden.
- Refinance your mortgage: Consider refinancing to a lower interest rate or shorter loan term. This could save you thousands in the long run.
- Eliminate PMI: Once you have 20% equity in your home, you can eliminate private mortgage insurance (PMI), saving you hundreds of dollars each month.
The Bottom Line
Biweekly mortgage payments can be a powerful tool for saving big on your home loan. However, it’s crucial to assess your financial situation and explore other options before taking the plunge. Remember, the key to financial success lies in making informed decisions and choosing the strategy that best fits your goals.
Are you prepared to experience the benefits of biweekly payments and hasten your transition to a mortgage-free lifestyle?
Pros and cons of biweekly mortgage payments
- Potentially significant reduction in total interest paid.
- Can shorten the overall mortgage term.
- can accelerate the process of equity building and PMI elimination.
- Some lenders charge fees for biweekly payments
- May need to watch out for prepayment penalties
- Biweekly payments don’t improve your credit score
Pros and cons of twice-monthly mortgage payments
- Makes budgeting simple
- Can be ideal if you get paid twice-monthly
- You don’t pay any extra toward your mortgage
- doesn’t enable you to reduce interest or expedite loan repayment
Biweekly Mortgage Payments vs. Monthly: Which Gets You Mortgage Free Faster?
FAQ
Does paying mortgage twice a month save money?
What happens if I pay 2 extra mortgage payments a month?
How much do biweekly payments shorten a 30 year mortgage?
How fast will I pay off my mortgage with biweekly payments?
Should I pay my mortgage twice a week?
One way to achieve this goal is to pay half your monthly mortgage every other week. Making biweekly mortgage payments can shave years off your loan and save you thousands of dollars in interest. Before you follow this strategy, check with your lender to ensure it allows biweekly payments and will credit you appropriately for your payments.
How often should you pay off your mortgage?
This effectively equates to 26 biweekly payments per year, totaling 13 full monthly payments per year, rather than 12. As long as you confirm with your lender or servicer, the additional payment will apply to your loan’s principal balance, help you pay off your mortgage sooner and save on interest.
Do biweekly mortgage payments save money?
Pay less interest. The higher your interest rate and the more you’ve borrowed, the more you could save. If you have a $300,000 mortgage at 4% for 30 years, biweekly payments will save you $35,000 in interest payments. If you have a $200,000 mortgage at 3% for 30 years, biweekly payments will save you $14,280.
How often should you make a mortgage payment?
Most homeowners make their mortgage payments once a month. However, unless you have a prepayment penalty — and that’s unlikely — you can chip away at your outstanding balance on a more frequent basis. With a biweekly mortgage payment plan, you can make half your normal monthly payment every two weeks and pay down your mortgage faster.