Is Making Biweekly Mortgage Payments A Good Idea?

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Is Making Biweekly Mortgage Payments A Good Idea?

You may have heard of biweekly mortgage payment programs as an alternative to regular payment schedules if you are a homeowner with a conventional mortgage and make monthly payments on your house.

Some lenders advise making biweekly mortgage payments rather than monthly ones in order to achieve this. According to traditional reasoning, making payments more often prevents interest from accruing, and over the length of a 30- or 15-year mortgage, that may equal years subtracted off your debt.

Check to see whether this rationale is sound and will save you money before committing to these monthly payments.

Building Better Credit

Some individuals think that paying monthly enhances your credit, but experts say this is nothing more than a fiction. Your mortgage lender will set you up on an automatic withdrawal plan with a biweekly payment schedule that ensures your payments are paid on time.

Before enrolling in a biweekly payment plan with a third-party lender, you should confirm that your mortgage company accepts biweekly payments since certain mortgage companies may not.

An automated payment plan can help your credit because of the on-time payments if you’re the kind of person who sometimes forgets to write the check and misses payments; however, you may obtain the same benefit from an automatic monthly payment as well.

Is Making Biweekly Mortgage Payments A Good Idea?

Does It Remove Interest From Your Loan?

Maybe it’s a myth. Why? Because there is a strong potential that the business receiving your mortgage payment isn’t the firm that owns the loan, depending on the specifics of your loan.

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Even if you pay twice a month, your payment servicer does not send funds to the business that holds your loan on a biweekly basis. And they’re probably keeping it till the end of the month in an account.

Key Takeaways

  • Numerous biweekly payment plans made available by lenders may not be the greatest financial decision for homeowners.
  • On a limited budget, maintaining monthly mortgage payments may not be feasible.
  • Your credit score may not always increase with biweekly mortgage payments.
  • Another strategy to lower your interest payments throughout the course of the loan is to make extra payments toward the principle of your mortgage.

But does this imply that the rising interest isn’t diminished? Keep in mind that there are 52 weeks in a year, which equates to 48 weeks if each month contains four weeks. This implies that biweekly payments will instead consist of 26 half payments, which is equal to 13 monthly payments each year rather than the usual two payments per month.

How the Math Works

If the math seems a bit confusing, it operates as follows: Biweekly payments are equivalent to 13 monthly payments in a year, while monthly payments are equal to 12 payments annually when made in the customary manner.

You may reduce the length of the loan’s life by six to eight years over time by paying an additional month’s worth of principle.

But do you have to pay for it on a biweekly basis? You might increase your monthly mortgage payment by multiplying the amount of one month’s payment by 12.

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Divide your monthly payment of $1,500 by 12 to get your monthly payment of $1625. To ensure that it gets applied to the loan’s principal amount, check with your mortgage provider to see if there is anything further you need to do.

Research Options Before You Sign a Contract

The decision to choose a lender’s biweekly payment plan might lead to two issues.

First off, they want to sign you up for this kind of plan because there are often costs associated with it, and those fees translate into money for the lender. For a loan of two weeks, they are billing you.

Second, the majority of customers already have a sufficient number of contractual financial commitments. It may be preferable to maintain some flexibility in your budgeting rather than committing to the monthly payments, particularly for individuals without a lot of financial reserves.

When you get three paychecks in a month, get a tax return, or come into additional money, you can always make extra payments.

The Bottom Line

Investigate if a bank or mortgage service provider’s sponsored plan fits for your budget if you’re thinking about a biweekly payment program to pay off your mortgage.

Mortgages may be paid off without enrolling in a program that could have costs associated with it. A monthly mortgage may not provide more advantages than disadvantages.

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