by Robert Hyder
By making half of a monthly mortgage payment every two weeks, homeowners can save a substantial amount of money over the term of a mortgage loan. Typically, if a homeowner pays half of their monthly mortgage payment every other week, they will reduce a 30-year fixed-rate mortgage by approximately seven years.
The reason is simple: instead of making 12 monthly payments, homeowners are making half a payment every two weeks, resulting in 26 half payments per year, or the equivalent of 13 monthly payments in a 12-month period. In the end, the principal is paid down a great deal faster, saving a significant amount of money on mortgage interest payments.
Most banks and mortgage lenders offer bi-weekly payment options, and many even offer a weekly mortgage payment option. If you’re willing to pay your mortgage bi-weekly, and your lender offers the opportunity for weekly mortgage payments, take full advantage.
Does this opportunity to pay off your mortgage early sound too good to be true? Well, there is one caveat: most banks that offer the bi-weekly or weekly payment options also charge a fee to sign up, often hundreds of dollars. However, there is a way to achieve the same results without having to pay these unnecessary fees. Merely make one extra monthly mortgage payment per year or simply distribute an extra month’s payment evenly throughout the year by paying down the principal each month. Most monthly mortgage statements provide an extra line for an “extra principal payment.”
To see exactly how much money a bi-weekly or weekly payment plan can save you over the life of your mortgage loan, an online accelerated mortgage calculator will do the figuring for you. You will be pleasantly surprised at how much time will be removed from your mortgage term.
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Cary Wulff
July 20, 2011 @ 8:39 am
I’ve never felt like I was in the cookie business. I’ve always been in a feel good feeling business. My job is to sell joy. My job is to sell happiness. My job is to sell an experience.
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