Bi-weekly mortgage payments are another way to pay extra principal and therefore pay down your principal faster. You can do this with a company or by yourself.

Biweekly Mortgage

A bi-weekly mortgage payment is when you break up your mortgage payment in half and pay it every two weeks instead of the whole payment just once a month. It is the same as bi weekly paychecks. If you get paid every two weeks, you are paid bi-weekly.

The benefit to this is at the end of the year, you have accumulated an additional mortgage payment.

To figure this, you take the 26 two week periods in a year compared to the 12 payments in a year on a typical mortgage repayment schedule.

For example, take a monthly payment of $1200…you pay $14,400 for the year in the normal monthly fashion.

However with a bi-weekly payment schedule you pay $600 (half the payment), 26 times in the year (bi-weekly)…for a total of $15,600…exactly $1200 more than the standard way.

Bi-weekly Mortgage Amortization

There is no magic here….you are simply giving the lender more money each year…specifically more principal. Virtually every mortgage permits the waiver of interest on principal that is pre-paid. In other words, the lender does not make money on principal paid back before it's due and therefore they don't charge you interest on amounts of principal paid early.

Of course, principal that would be considered “paid early” can be found by viewing your existing mortgage's amortization schedule. On this schedule, you'll see what principal is due and when. Should you pay any principal amounts you see early, you'll save the interest charge associated with it.

The biweekly mortgage payments savings equates to taking about 7 years off the life of your loan. Needless to say, shaving seven years off the life of any loan can amount to 10's of $1,000s.

For example, using the $1200 a monthly example, seven years of savings equates to $100,800!

Making extra mortgage payments is a wonderful idea. Anytime you can pay extra principal it saves you massive amounts of interest.

However, getting this option through your lender is not the only way to do it. You can do it yourself. A bi weekly payment option is not always through your lender. It can be through a third party company that collects your payments each month and forwards the payment to your lender. They may also charge a fee for this service.

They then put the additional principal into an account. At the end of the year, they pay your lender the extra principal. When it comes to your money, anything you can do yourself is probable best. At least you know where you money is and it's earning interest in your own account.

Biweekly Mortgage Calculator

If you are going to start a principal reduction strategy, you'd be better advised to use the most effective pre-payment method than the biweekly method.

We outline the most effective method for reducing principal and saving on interest in this post.

Take a quick look…read the article…download the free software…and get started today.

You'll be glad you did.


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