Get more for your dollar and consider a biweekly mortgage. By making payments every two weeks, you may be saving yourself thousands of dollars in the long run.
You may already be a homeowner or perhaps you are thinking about buying a new home. Whatever the case, you don’t necessarily have to lock yourself into a traditional 30-year mortgage. These days, a biweekly mortgage is becoming a more attractive option for consumers. Below, a look at how biweekly mortgages work and if its in your best interest.
Prepaying Your Mortgage
Prepaying your loan can definitely improve your family’s financial situation. If you don’t prepay on your mortgage, consider this: for years to come you will be paying an astronomical amount of interest over the life of the loan. Therefore, you will be paying much, much more over the amount you initially borrowed.
When you prepay your loan, the extra payment is applied to the principal. By doing so, you will have reduced the overall interest and term of the mortgage.
The BiWeekly Advantage
If you choose to pay biweekly, you will be making a payment every two weeks instead of once a month. To calculate what you would pay on a biweekly mortgage, figure that payments are equal to one-half of the monthly figure. And at the end of a 12-month period, you will have made an extra mortgage payment.
Figure into the fact that you will be saving thousands of dollars in interest by paying off your mortgage years in advance.
Before you decide to go biweekly, let’s look at some of the restrictions.
Not As Available: Since biweekly mortgages are not as readily available as conventional mortgages, you may not be getting the best interest rate. Since interest rates tend to be higher than a traditional mortgage, figure out if it’s worth taking out a biweekly mortgage in the long run.
Budgeting: Since you will have to make payments every two weeks, and extend yourself to dish out more money each month to apply toward your principal, is this an option you can afford?
If you feel that a biweekly mortgage is too rigid, then consider prepaying your traditional mortgage when you see fit. An extra payment here and here will also help to decrease your debt.