This guide covers the benefits of making bi-weekly mortgage payments. The benefit of bi-weekly mortgage payments is that homeowners can pay off their loan balance before their 30-year fixed rate term. In the following paragraphs, we will be discussing how making bi-weekly mortgage payments can save you mortgage interest and shave four years off a 30-year fixed-rate mortgage:
Many homebuyers have seen mortgage companies advertise by making bi-weekly payments that, they can shave years off the term of their mortgage loan. Many loan officers also advise making bi-weekly housing payments to their clients.
Making bi-weekly loan payments commits homeowners to make one extra mortgage payment per year. If a homeowner can discipline themselves and enter into bi-weekly housing payments, it will save them mortgage interest and can reduce the term of their mortgage loan. This article will discuss and cover bi-weekly payments and its benefits for homeowners.
Making Monthly Mortgage Payments
The standard way of paying monthly mortgage payments is to make payments at 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, homeowners will make 360 mortgage payments to pay the loan balance in full. Homeowners’ monthly mortgage payments consist of a principal payment and an interest payment.
The principal payment of the mortgage payment is what reduces the loan balance. The mortgage payment’s interest portion is the cost the lender charges for lending borrowers the money.
What Are The Benefit of Making Bi-Weekly Payments
Making bi-weekly mortgage payments will reduce the term of a mortgage loan. Homeowners make their mortgage payments at the beginning of the month. They will be making 12 mortgage payments per year. By making bi-weekly payments, borrowers will be making 13 payments per year.
When homeowners make monthly mortgage payments, they make 12 months of principal and interest payments per the mortgage agreement terms. Making bi-weekly mortgage payments means borrowers will make 13 payments versus 12 in a year. The 13th payment will go towards the payment of their principal payment.
This will pay down the balance of their mortgage. The 13th mortgage payment will go 100% toward paying the principal loan balance. By doing so, the mortgage will be paid down before the mortgage loan term is due. Making bi-weekly housing payments will reduce the 30-year term of a home loan to 26 years. The bi-weekly payments make borrowers pay their home loan four years sooner.
Making Additional Bi-Weekly Mortgage Payments
If the homeowner’s goal is to pay off their mortgage sooner than the 30-year mortgage loan term, they can accelerate it by making additional monthly payments or a large lump sum.
If a homeowner gets an annual bonus from their job and wants to reduce the loan balance, they can pay the bonus to their mortgage company. That will go straight into paying down the principal balance of their mortgage loan.
With bi-weekly mortgage payments and additional payments on top of the minimum due, they will be surprised by how many years sooner they can pay off their mortgage loan. They can achieve the American dream of being a homeowner with no mortgage sooner than later.
Choosing the Term of Mortgage
Many mortgage companies will give borrowers a minimum payment due on their mortgage payment for a 30-year plan, a 25-year plan, a 20-year plan, and a 15-year plan. By choosing a shorter-term plan and making those payments in bi-weekly mortgage payments, they can reduce the mortgage loan term sooner. Making bi-weekly mortgage payments is highly recommended and will save homeowners thousands of dollars in the long term. Making bi-weekly mortgage payments.
