Bi-Weekly Mortgage Payments – Are They Worth It?

By
Mortgage and Lending with Strategic Mortgage NMLS#160440

The idea behind the bi-weekly mortgage payment, is that you make half a mortgage payment, once every two weeks, instead of making one full payment per month. Annually, this allows you to make thirteen payments instead of twelve. If you stick with payment program, it would allow you to pay off a traditional 30-year loan, four years faster, at 26 years.

 

The Program Works

Paying off your mortgage faster is a good thing and helps you to save interest in the long run, so there is no debating that the bi-weekly mortgage program works. However, when making bi-weekly payments, it’s also important to analyze when the additional payment gets applied. Many lenders will not apply your “thirteenth” payment until the end of each year, once your excess payment balance equals one full additional payment.

 

Better Options To Pay Off Your Home Loan Faster

 While the bi-weekly mortgage payment will allow you to pay off your home loan faster, there are other better options to pay off your home loan faster.

 

If you want to pay one additional payment each year, a more effective way to do so, is to divide the principal and interest portion of your loan by 12 and send in 1/12th of your mortgage payment as an additional principal payment on a monthly basis. This will allow that extra principal payment to post immediately and not at the end of the year.

 

Yet another option is to make one larger lump sum payment at one point in the year, such as when you receive a tax return or if perhaps you receive extra income at any point. This will again allow that extra payment to be applied right away, which then increases the effectiveness of every payment you pay from that point forward.

 

Make Sure Your Interest Rate Is Allowing You To Maximize Your Payment

 

Finally, it’s important to also to make sure your current interest rate is as low as it can be, to maximize the effectiveness of your monthly payments. If you are paying an above market interest rate, then it may make sense to refinance into a lower interest rate and take the savings and apply it to your monthly payment going forward. You then will be in a position to pay off your home loan sooner, without paying anything additional on a monthly basis.

 

For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: bill@strategicmtgaz.com or online at www.strategicmtgaz.com 

Strategic Mortgage, LLC - NMLS#158804- Equal Housing Lender – AZBK#0909514

Vasilios Bill Kamboukos Jr – NMLS#160440

 

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Rainmaker
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Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

I know many folks are happy that they chose to pay this way....

Jan 08, 2018 07:33 AM #1
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