Bi-weekly Mortgage Payments
While there are differing schools of thought when it comes to whether or not a person should pay off a mortgage before the loan term ends, there may be some benefits to making payments on a bi-weekly basis as opposed to monthly basis. Here are two reasons why you may want to consider making bi-weekly payments vs. monthly payments.
1.) You’ll Make An Extra Payment Per Year
If you’re looking to pay off your mortgage ahead of schedule, making bi-weekly payments means you’ll make an extra payment every year. Instead of making 12 large payments every year, you’ll make 26 small payments. These 26 small payments would be equal to about 13 large payments. This is the equivalent of an extra payment per year and 10 extra payments over 10 years. If you have a 30-year mortgage, you could pay it off between two and three years early because you will make your last payment 30 months ahead of schedule.
2.) You Will Reduce the Amount of Interest Paid on the Loan
Paying off your mortgage faster reduces the amount of interest that you pay on the loan. Even if you only make one extra payment per year, you could still save thousands of dollars in interest by paying your loan several months or years early. To determine exactly how much you will save, you can use an amortization table or calculator to see how much interest you pay over the full 30 years as opposed to taking only 27 or 28 years to pay for your home. It is also important to note that making extra payments adds to the equity that you have in the home.
Keep in mind, each bank handles bi-weekly payments differently, so reach out to your lending institution if you think bi-weekly payments might work for you!
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