Are Biweekly Mortgages Really Worthwhile?

Are Biweekly Mortgages Really Worthwhile?
You probably have heard about advantages of biweekly mortgages; things like you can save thousands of dollars and get some 5 or 7 years of your loan. The other thing is that most mortgage brokers will charge you a fee of around $400 to set you a plan like that. In fact, you can set a biweekly money-saving mortgage plan all by yourself not paying any extra costs and begin to save your money.

You need to study biweekly mortgage offers carefully because sometimes even though you pay your mortgage payments every two weeks they can be posted on your account on monthly basis. This means that you won’t be able to save anything on interest since mortgage interest payments are done in arrears (as opposed to the rent payments, which are paid in advance). The only way to save is to make one extra payment a year, and you don’t have to pay someone $400 to do this.

Here’s how biweekly payments work: You make 26 payments a year (every other week for 52 weeks) which makes 13 usual monthly payments. In other words you simply make one extra payment a year. This significantly shortens the life of your loan and can help you to save thousands of dollars.

If you get paid every two weeks there is an alternative. Divide your monthly interest payment and principal by two and than send your lender a check for that amount every month when you get three paychecks. Sending in two of those checks a year will make your extra payment.

Another way to make an extra payment a year is to divide your monthly principal and interest payment by twelve and add the result to every one of your payments. This will not seriously influence your financial situation but will help you to save a lot of money and significantly shorten your loan’s life.

So as you can see making an extra payment a year can be rather advantageous. The other thing is that you absolutely don’t have to pay someone to do it for since you can easily do it yourself.

© 2010, Jericho Mortgage — Are Biweekly Mortgages Really Worthwhile?