Things you need to know about Bi-weekly Mortgage
Paying your mortgage is the hardest part of investing. Paying it on time is even harder especially in this trying time. Amidst this pandemic and economic instability, the possibility of losing your home because you can’t make the mortgage payments can be terrifying. Perhaps you’re having trouble making ends meet. You or a family member might have lost a job or you’re having other financial problems. These problems can affect how you pay for your mortgage. If you are one of the many people who experience mortgage anxiety, paying the mortgage biweekly might help save your home and avoid foreclosure of the property.
What Is a Biweekly Mortgage?
A biweekly mortgage allows the borrower to make payments every two weeks instead of once a month. It means that the borrower is paying every two weeks, equal to 26 half payments. The result is 13 full or monthly payments over a 12-month period. Because you have an extra payment within a year, you are accelerating payoff of the loan. The extra payment per year can provide significant savings in total interest over the life of the loan.
To understand better how biweekly payment can help you, check out this Biweekly Mortgage Calculator. You can use this free calculator to discover how much time and money you will save by making regular biweekly payments rather than monthly payments on your home.
Here’s how to use the calculator :
In the Loan Information, provide the values for the home price or the total amount of your home, the down payment which should be at least 25% of the home price, home loan amount is automatically calculated by subtracting the down payment from the home price. Whatever difference is the home loan amount or your mortgage.
Annual Interest Rate is the rate given by your lender for a specific amount of loan. To help you find the best lender in your area, click the Rates tab.
Term of the Loan is the length of your loan contract in years. It could be up to 30 years. Remember that the longer that you pay off your mortgage, the higher the interest it accumulates over time.
Private mortgage insurance or PMI portion is no longer needed if you paid at least 25% down payment.
Start Date of Mortgage, the month and year you started paying biweekly mortgage. The calculator presumes you start making biweekly payments at the onset of the mortgage.
You also have to provide the amount of Other Ownership Expenses such as the following :
- Annual Real Estate Taxes
- Annual Homeowners Insurance
- Monthly HOA Fees
The most helpful information from the result that you will obtain from this calculator is the pay-off date comparison. The calculator will clearly show how many months or years you will save from paying bi-weekly mortgage instead of the regular monthly payments. For a 30-year fixed contract, you can save almost 4 years, meaning if you started paying bi-weekly on the onset of the mortgage, for example February 2021, you will finish paying off your loan by 2047 instead of 2051 and you can save as much as 15% of interest.