Are There Advantages to Paying Weekly on a Mortgage?
The common agreement for paying back a mortgage loan is to make monthly installments. In some cases, however, you have the option of making payments each week on your mortgage instead of once per month. Before you make the final decision to pay weekly, consider the potential advantages of this type of mortgage payment arrangement.
Other People Are Reading
-
Quicker Payoff
-
When you pay weekly, you end up making extra payments on your mortgage, which reduces the length of your loan. Take for example a monthly mortgage payment of $500. When determining a weekly payment amount for a mortgage, divide the monthly payment by four -- the average number of weeks in a month. In this example, $500 divided by four equals $125. If you pay once per month, your total payment for the year is $6,000. If you pay once at the beginning or end of each week, the annual payoff amount is $6,500 ($125 times 52 weeks in a year), which results in one extra payment for the year. Paying that additional amount each year can shave years off of the length of your mortgage term.
Convenience
-
If you have a problem with keeping up with your mortgage payments, it could help you to make weekly payments instead of one lump-sum payment each month. If you receive a weekly paycheck, you could aim to save a portion from each check to cover the monthly payment. However, if you send the weekly mortgage payment amount from each check, you can get the payment out of the way and avoid inadvertently dipping into your savings.
-
Reduced Chance of Late Fees
-
Committing to pay your mortgage weekly also could reduce or eliminate problems with late fees. Banks commonly assess a late fee after the 16th day of a month. If you keep up with your regular weekly payments, you reduce the chance of accidentally forgetting to pay in advance of the grace period deadline.
Talk to Your Mortgage Company
-
Don't assume that you can just start making weekly payments on a mortgage --- talk to your lender first. Some mortgage companies may require you to set up a special weekly payment arrangement. You also may have to pay installment fees for paying four times per month. If your mortgage agreement stipulates a prepayment penalty --- an additional cost the lender charges when you pay the mortgage balance sooner than planned --- it could affect your decision to make weekly payments.
-
