Advantages Of Bi-Weekly Mortgage Payments
Benefits of bi-weekly mortgage payments:
Many home buyers have seen mortgage companies advertise by making bi-weekly mortgage payments that they can shave off years off the term of their mortgage loan. Many loan officers also advise making bi-weekly mortgage payments to their clients. By making bi-weekly mortgage payments, it commits you making one extra mortgage payment per year on your mortgage and if a homeowner can discipline themselves and enter into a bi-weekly mortgage payments, it will save them mortgage interest and can reduce the term of their mortgage loan.
Making Monthly Mortgage Payments
The standard way of paying your monthly mortgage payments is to make your monthly mortgage payments in the beginning of the month and no later than the 15th of the month. This equates to 12 monthly mortgage payments per year. On a 30 year fixed rate mortgage loan, you will be making 360 mortgage payments in order to have your mortgage loan balance paid in full.
Every monthly mortgage payment you make consists of your principal payment and interest payment. The principal payment of your mortgage payment is what reduces your mortgage loan balance. The interest portion of your mortgage payment is the cost the lender charges for lending you the money.
Bi-Weekly Mortgage Payments
Making bi-weekly mortgage payments will reduce the term of your mortgage loan. If you make your mortgage payments in the beginning of the month, you will be making 12 mortgage payments per year. Making bi-weekly mortgage payments, you will be making 13 payments per year. When you make your monthly mortgage payments, you are making 12 months of principal and interest payments per the terms of your mortgage agreement and the 13th payment will go towards the payment of your principal payment and this will pay down your balance of your mortgage. The 13th mortgage payment will go 100% towards paying down your principal mortgage balance and by doing so, the mortgage will be paid down before the mortgage loan term is due. Making bi-weekly mortgage payments will reduce the 30 year term of your loan to 26 years, making you pay off your home loan 4 years sooner.
Making Additional Mortgage Payments
If your goal is to pay off your mortgage sooner than the 30 year term of your mortgage loan, you can accelerate it by making additional payments every month or a large one lump sum. If you get an annual bonus from your job and you want to reduce your mortgage loan balance, you can pay the bonus money to your mortgage company and that will go straight in paying down your principal balance of your mortgage loan. With the combination of making bi-weekly mortgage payments and making additional payments on top of the minimum due, you will be surprised on how many years sooner you can pay off your mortgage loan and achieve the American dream of being a homeowner with no mortgage.
Many mortgage companies will give you a minimum payment due on their mortgage payment for a 30 year plan, 25 year, plan, 20 year plan, and 15 year plan. By making your the plan you choose but to make those payments in bi-weekly mortgage payments, you will reduce the term of the mortgage loan term sooner. Making bi-weekly mortgage payments and making additional mortgage payments is highly recommended and will save you thousands of dollars in the long term.