Do you wish you could pay off your home mortgage loan more quickly than with a traditional 30-year fixed rate loan, significantly reducing the amount of interest you pay over the life of the loan? Well bi-golly, a Biweekly Mortgage may be right for you.
Biweekly Mortgage payments are made every two weeks, resulting in 26 (sometimes 27) payments per year. As a result of the number and frequency of payments, you can pay off the loan faster than with a traditional 30-year, fixed rate, monthly payment mortgage. For example, a loan that ordinarily would take 30 years to amortize fully could be paid off after just 23 years of biweekly payments depending on the interest rate of the loan. A Biweekly Mortgage may also save you interest expenses over the life of the loan. For example, a $150,000.00 loan at 7 percent rate paid monthly over 30 years will cost a borrower approximately $53,000 more in interest over the life of the loan than a Biweekly Mortgage for the same loan amount and interest rate.
I’m not sure about you, but an extra $53K might come in handy someday.
Good stuff, Tom. Those of us with mortgage rates that are low relative to current rates can approximate the advantages of a bi-weekly mortgage by taking the monthly payment, dividing it by 12, and adding that amount to our monthly payment as a principal reduction.