Should You Try a Bi-Weekly Mortgage Payment Program?

You have probably seen mortgage lenders advertising biweekly mortgage payment programs. These are programs where you send mortgage payments to your bank once every two weeks instead of once a month. (You send half of your monthly amount every two weeks.) It sounds like a great and simple way to save money and even cut a few years off your mortgage but you should be sure to read the fine print. Before deciding to go with a company’s bi-weekly payment plan, be sure that:

  • The company will apply the partial payment to your mortgage on the day that it is received.
  • The payment plan is for a bi-weekly payment plan (a total of 26 payments per year) and not a bi-monthly plan (a total of 24 payments per year).
  • The company is not charging excessively high fees for their bi-weekly payment plan services. If the company wants to charge you for the bi-weekly payment plan, it is probably not worth it.

The real advantage to making bi-weekly payments is that you end up paying 13 full payments a year instead of 12. If the 13th payment goes directly toward your principal amount, then you are lowering the amount that you owe faster and can reduce your 30-year loan by up to 7 years. One way to accomplish the same thing as signing up for a biweekly mortgage payment program is to just send in an extra mortgage payment one time each year—consider doing this before setting up a bi-weekly mortgage payment plan.

 

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