If you want to reap more financial benefits while only making a subtle change, paying your mortgage biweekly (every two weeks) may be the adjustment you need. Most homeowners currently have a monthly mortgage payment, consisting of some principal and some interest. Changing your mortgage payment to every two weeks has substantial advantages!
How To Make Biweekly Payments?
To make biweekly payments, take your monthly mortgage amount and divide it in half. This smaller amount is what you should pay every two weeks. Your lender can assist you in this. If your mortgage is $2,000 a month, you would now pay $1,000 biweekly. Essentially, you are paying the same amount monthly but breaking the payments up in smaller increments. Why is this beneficial?
It All Comes Down to the Calendar
There is not a uniform number of days (or weeks) in every month. If you pay your mortgage monthly, that accounts for 12 full payments per year. Due to the number of days being inconsistent each month, paying biweekly will account for 26 half payments, or 13 full payments, per year. Therefore, you are paying an extra month of mortgage each year while barely feeling the change; you are budgeting this money over the course of 12 months. Let us explain why this is greatly beneficial to you!
Why You Should Consider Biweekly Payments
- You will pay off your mortgage faster.
Nobody loves paying a mortgage payment; the faster it is paid, the better. Since you are paying an extra full payment a year, you will pay off your mortgage faster. This may still seem like a lengthy payment to you, but this method can save you years off your mortgage payment.
- You will pay less interest.
As mentioned earlier, a mortgage payment consists of interest and a principal amount (original amount of loan). The interest paid is a consistent percentage of the principal amount left to pay. Therefore, paying an extra payment a year will allow you to pay off more of your principal amount. As the principal amount lessens, so does the amount of interest you pay. Likewise, this may seem like a small change, but this will save you a lot of money over the course of your loan!
- You will gain more equity.
This is one of the main benefits of biweekly payments. Equity represents how much of the home you own versus how much the bank owns. If you manage to pay an extra full payment a year, you are paying off more of the loan; this correlate directly to owning more of the home sooner. More equity increases your net worth and assures you financial stability if you ever sell your home.
Are Biweekly Payments for You?
Clearly biweekly mortgage payments can have plentiful benefits for the borrower. If this seems plausible for you and your family, consider making this change. Contact a team member to assist you in a biweekly payment schedule!