By Mark Richards from Fairway Independent Mortgage in Ridgewood, NJ.
When you purchase a home using a lender such as Fairway Independent Mortgage Corporation, your mortgage payments are due once a month by default. Some homeowners, however, choose to make biweekly payments. This is done in an effort to pay off a mortgage faster and pay less interest over the life of the loan.
If you make one monthly mortgage payment, that comes out to 12 payments per year. If you enroll in a biweekly payment program, you will pay half of your mortgage payment every other week. Since there are 52 weeks in a year, you will make 26 biweekly payments — which comes out to 13 monthly payments. With the biweekly plan, you’re effectively making an extra payment, which goes toward the principal value of the loan. Because it is reducing the amount of the loan at a quicker pace, the extra payment will decrease the interest charged over the life of the loan.
Another way to make biweekly payments is to do the budgeting yourself. Divide your monthly mortgage payment by 12, then make an extra principal-only payment of that amount each month. Another option is to save that amount every month for 12 months, then make an extra mortgage payment for that year. Before you begin this process, call your mortgage lender to make sure there are no prepayment penalties and that your extra payments will be applied directly to the principal of the loan.
To learn more about biweekly payments, click here.
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