What Are the Benefits of a Bi-Weekly Mortgage Payment?
Paying a mortgage on a biweekly basis is the preferred method by some financially savvy homeowners. In most instances, your biweekly mortgage payment can be set up to coincide with your pay check. In some circles, a biweekly mortgage plan may be frowned upon due to initial set up costs, and the per transaction fee charged by some banks. However, you may be able to bypass this negative aspect of biweekly mortgage plans by putting yourself on a biweekly mortgage payment plan.
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Financial Savings
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Paying your mortgage on a bi-weekly basis allows you to save thousands of dollars in the long run. When you elect to pay your mortgage on a bi-weekly basis, you'll actually be making 13 mortgage payments instead of the customary 12 monthly mortgage payments in a year. Since there are 52 weeks in a year, you'll make payments 26 times a year. This amounts to 13 mortgage payments.
The two additional payments to your principal each year allow you to build equity in your home, which results in building your net worth faster.
Pay off Your Mortgage Faster
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Not only will your net worth increase faster as a result of making bi-weekly mortgage payments, you'll pay off your mortgage 6 to 8 years earlier as well. Bi-weekly mortgage payments are an accelerated way to pay off your mortgage. This will facilitate your ability to reach other financial goals faster such as retirement or building your own business.
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Simplicity
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Making bi-weekly mortgage payments on your home loan is a simple system to implement. Take your total monthly mortgage payment, and divide it by 2. This is the total you should pay on a bi-weekly basis. For example, if your mortgage payment is $2000 per month. Make bi-weekly payments of $1000. This will result in you paying $26,000 a year on your mortgage, rather than $24,000 you would have paid over 12 once monthly payments.
Due to certain lender restrictions, you may be better off making your regular monthly mortgage payments, but sending in an additional payment. If this option works for you, be sure to inform your lender that you want your additional payment applied to the principal of your loan. Otherwise, your additional payment may be applied as an early monthly payment.
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