bloglines.com
Does It Improve Credit Rating?

Does It Reduce the Interest?

How Does the Math Work?

What's the Downside?


Is Making Biweekly Mortgage Payments a Great Idea?

Suzanne is a content online marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and assists develop content techniques.

If you are a property owner with a traditional who makes month-to-month payments on your home, you might have found out about biweekly mortgage payments as an alternative to standard payment plans. The reasoning is that increasing the frequency of the payments lowers the interest that develops and, over the course of a 30- or 15-year mortgage, that can equate to years of payments removed from your loan. However, biweekly mortgage payment programs typically carry extra fees and need consenting to a bigger payment amount.

Before you sign up for biweekly payments, it 'd be a good idea to weigh the advantages and downsides of this kind of program to determine whether it will in fact save you any money.

- Some biweekly payment programs provided by loan providers are not the finest monetary choice for the house owner.

• Committing to biweekly mortgage payments can be challenging on a tight budget.
• Biweekly mortgage payments will not always improve your credit rating.
• Making extra payments towards the principal of your mortgage is a method to decrease your interest payments over the life of the loan. You don't need an official arrangement to do this.
• In any case, make certain your mortgage doesn't come with an early prepayment penalty. That will damage any technique for paying off the loan early.
  
  milan2099/ Getty Images
  
  Will Switching to Biweekly Payments Boost My Credit Report?
  
  Using a biweekly payment schedule established by your mortgage loan provider puts you on an automated withdrawal plan that ensures that your payments are made on time.
  
  If you're the kind of person who misses out on payments from time to time because you forgot to write the check, an automated payment schedule will improve your credit due to the fact that your payments will be on time. However, you can get the very same benefit with an automated month-to-month payment.
  
  Will Biweekly Payments Reduce the Interest I Pay?
  
  The concept that biweekly payments will decrease your interest payments may be a myth. Why? Because, depending on the details of your loan, there is a great chance that the business receiving your mortgage payment isn't the business that holds the loan.
  
  Although you're paying twice monthly, the servicer getting your payment isn't making biweekly payments to the business that owns your loan. It's most likely that they're most likely holding the payment in an account until completion of the month.
  
  But will you still be minimizing the interest that is building up with time? Yes. Bear in mind that each calendar year has 52 weeks. If every month has four weeks that equals 48 weeks. So, biweekly payments do not include 2 payments each month however rather amount to 26 half payments-the equivalent of 13 month-to-month payments in a year.
  
  Some mortgage companies don't accept biweekly payments on mortgages, so you ought to ask ahead of time before signing up for a biweekly payment strategy through a third-party loan provider.
  
  How Does the Math Work on Biweekly Mortgage Payments?
  
  It works like this: Biweekly payments amount to 13 monthly payments in a year, while conventional regular monthly payments amount to 12 payments each year.
  
  By paying an additional month every year, you're paying extra principal, which shaves six to 8 years off the life of the loan with time.
  
  But do you need to make biweekly payments to do that? Instead, you could divide the overall of one month's payment by 12 and include that total up to your regular monthly mortgage payment.
  
  If you're paying $1,500 monthly, divide 1,500 by 12 and make your monthly payment $1,625. Talk with your mortgage company first to ensure there isn't something more you have to do to make sure the money is applied to the principal amount of your loan.
  
  What's Wrong with Biweekly Mortgage Payments?
  
  There are potentially two issues with choosing a lender's biweekly payment program:
  
  - There are frequently fees connected to this payment strategy. That consumes into the quantity you're conserving by accelerating your payment schedule.
  - You may, like most American customers, already have enough legal payment responsibilities in your life. Unless you have considerable monetary reserves, you may want to keep some flexibility in your budget instead of devoting to biweekly payments.
  
  Remember, you can constantly make an additional payment when you get 3 paychecks in a month, receive a tax refund, or come into a windfall. You don't have to contractually obligate yourself to do it monthly.
  
  Why Are Biweekly Mortgage Payments a Good Idea?
  
  There are a number of advantages to biweekly mortgage payments. They include:
  
  - Paying off your mortgage much faster, and paying less interest over the life of the loan.
  - Building equity in your house faster.
  What Are the Downsides of Biweekly Mortgage Payments?
  
  Signing an official arrangement to make biweekly mortgage payments has a couple of potential downsides:
  
  - There are often costs included and they will eat into the amount you're conserving by increasing your annual mortgage payment.
  - You're locking yourself into a dedication to pay a larger quantity every year. If your spending plan takes a hit from another direction, you might be sorry for that.
  What Are Other Ways I Can Pay Down My Mortgage Faster and Cheaper?
  
  You can pay off your mortgage earlier and decrease your interest expenses without committing to a biweekly mortgage payment. For instance, you can utilize a bonus offer or an unforeseen windfall to settle a piece of your mortgage. If you get a tax refund, put the cash versus your mortgage.
  bloglines.com
  Whatever you do, make certain that you call your mortgage holder beforehand and make certain that your extra payment will be used against the principal of your mortgage loan.
  
  There are ways to pay down a mortgage without signing up for a plan that might feature charges connected. The benefits might not surpass the gains of a biweekly mortgage.