Can A Bi-Weekly Mortgage Really Save You Money?

Question: Can A Bi-Weekly Mortgage Really Save You Money?

Answer: Yes, but it’s not as simple as just making an extra payment every two weeks. In order for this method to work you need to have the right type of loan. The difference between having the right type of loan and the wrong type could cost you over thirty thousand dollars over the life time of your loan. The other benefit you receive from a bi-weekly loan compared to a traditional mortgage is that your loan will actually be played off on average 6 years sooner than a traditional thirty year.

To do this form of payment correctly you need to know what to look for in a loan so you get the right type of loan. You need to be able to determine what companies are actually saving you money by using them, and which companies are just plain costing you money for nothing.

I’ll start by strongly suggesting that you do this method yourself. Make it a habit to send money to your mortgage company every two weeks; they get paid when you get paid. Don’t use calendar dates to plan your budget – instead use pay cycles. Make a list of everything that you need to pay and pay that bill when it’s in your pay cycle. Pay your bills online and you won’t get nickel and dimed to death by having to buy stamps all the time.
The first thing to you want to do is to call your current mortgage company; you can usually find a number for them on your monthly mortgage statement. Once you get through ask the customer service rep if the payments for your mortgage are processed against your loan immediately or if payment processing is done once a month. If your lender isn’t processing the payments immediately then you have the wrong type of loan.
While you’re still on the phone with your lender check to make sure you are not charged an early payment penalty.

Beware of signing up for a bi-monthly mortgage. It is not the same as the bi-weekly mortgage. With a bi-monthly mortgage, you pay one-half your monthly mortgage twice a month as opposed to every two weeks. The bi-weekly method pays half your mortgage every two weeks resulting in an extra payment at the end of the year. The bi-monthly mortgage does not make the extra interest payment and does not save you thousands of dollars in interest money.

Whenever you include additional money in your payment, make sure you include a note that it is to be applied to the principal, not to the next month’s payment.

Whether you had the right type of loan or you had to refinance the hardest part about saving money with the bi-weekly payment method is keeping on track The difference between succeeding and failing is discipline. There are so many people who try this payment method and are just full of ambition, and then stop completely because they lost track of the long term benefits. You need to have the discipline to make your payments despite the obstacles that life will throw at you.

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