Benefits of a Bimonthly Mortgage

A bimonthly mortgage lets a borrower pay off the home loan faster.

With a bimonthly mortgage, the payment is made every other week instead of once a month. To calculate the payment, the bank or mortgage company simply divides a regular monthly payment in half. This equates to 26 payments per calendar year, which is the equivalent of 13 monthly payments in a 12-month period.

Reduced Term

With a 30-year fixed-rate mortgage, each extra monthly payment made per year takes approximately seven years off the term of the mortgage. Therefore, with the bimonthly mortgage payment, a borrower reduces a 30-year mortgage to a 23-year one. This results in substantial interest savings over the life of the mortgage and lets the borrower eventually own the home free and clear faster.

Ease of Budgeting

Many borrowers are paid every other week. A bimonthly mortgage helps these borrowers easily budget their bimonthly paycheck and avoids the need to save for the next mortgage payment over a four-week period. It also results in smaller payments (compared with a larger monthly payment), which makes the budgeting process for the borrower easier as well.

"Forced" Extra Payments

Many borrowers struggle to make an extra mortgage payment each year in a lump sum. This large extra payment is hard for many homeowners to save for and requires some real discipline in budgeting. With a bimonthly mortgage payment, the borrower is "forced" to make an extra payment and does not have to save funds each week or month to meet this extra payment goal.

References

• Financial Web: All About Prepayment
• Kiplinger: Extra Mortgage Payments Can Pay Off