The Pros And Cons Of A Bi Weekly Mortgage

The Pros And Cons Of A Bi Weekly Mortgage



The Pros and Cons of​ a​ Bi-Weekly Mortgage
Having a​ mortgage can be expensive; with the​ interest that is​ charged over the​ life of​ your mortgage,​ a​ large portion of​ what you​ end up paying is​ nothing more than interest payments and not the​ loan itself .​
Obviously it's important to​ be able to​ pay off your mortgage as​ quickly as​ possible in​ order to​ keep the​ interest at​ a​ minimum,​ just as​ it's important to​ make sure that all of​ your payments are made on​ time so as​ to​ avoid late fees or​ other costs .​
One option that can help you​ to​ pay off your mortgage early while giving you​ the​ added benefit of​ having to​ pay less at​ any given time is​ a​ bi-weekly mortgage.
If you​ aren't familiar with the​ term,​ a​ bi-weekly mortgage is​ a​ payment plan which allows you​ to​ make a​ partial payment on​ your mortgage every two weeks .​
It's not an​ actual mortgage loan,​ but instead is​ a​ service which will help you​ to​ pay off your mortgage faster than you​ would be able to​ by simply making your standard payments each month .​
There are a​ number of​ pros and cons associated with bi-weekly mortgage services,​ and you​ should stop and consider some of​ these in​ order to​ make sure that a​ bi-weekly mortgage plan meets your financial needs.
How Bi-Weekly Mortgages Work
When you're using your standard mortgage payment plan,​ you're making one payment every month for a​ total of​ 12 payments per year .​
With a​ bi-weekly mortgage plan,​ however,​ you're making a​ payment equal to​ one half of​ your current payment every two weeks… this equals out to​ 26 half-payments over the​ course of​ a​ year .​
a​ bi-weekly mortgage essentially allows you​ to​ make one extra full payment each year,​ taking a​ full month off of​ your repayment schedule every year that you're using the​ bi-weekly mortgage plan .​
Even though you​ have to​ pay a​ service charge to​ the​ company offering the​ bi-weekly mortgage service,​ the​ savings that you​ receive in​ interest works out so that you​ still save money even with the​ added fees.
Advantages of​ a​ Bi-Weekly Mortgage
Obviously,​ the​ biggest advantage to​ a​ bi-weekly mortgage plan is​ the​ fact that you​ can pay off your mortgage early and save a​ significant amount of​ money on​ the​ interest that you​ have to​ pay .​
For most homeowners,​ this savings will be quite significant as​ they will be able to​ pay their mortgage off as​ much as​ two or​ three years early .​
Since the​ individual payments are lower than they would be if​ you​ were paying the​ full amount once per month,​ bi-weekly mortgage payments can also be much easier to​ fit into your budget .​
Many companies who offer bi-weekly payment services will let you​ tailor your payment due dates so that they best fit your income,​ letting you​ make payments when you​ get paid.
Disadvantages of​ a​ Bi-Weekly Mortgage
While bi-weekly mortgage payments may sound wonderful,​ there are some drawbacks associated with them as​ well .​
Probably the​ most important of​ these is​ the​ fact that even though you're making your payments to​ the​ service provider,​ you​ are still the​ one who is​ responsible for your mortgage .​
The service provider isn't a​ lender and doesn't have any sort of​ influence or​ control over your mortgage itself .​
They only make your mortgage payments once per month,​ just like you​ would; in​ the​ unlikely event that there's some problem in​ processing the​ payment,​ you​ may be required to​ pay it​ out-of-pocket while the​ problem is​ sorted out or​ risk receiving late fees or​ an​ interest rate increase for a​ late payment.
Another main drawback to​ bi-weekly mortgages is​ that the​ service which these companies offer isn't anything that you​ couldn't do by yourself with proper budgeting .​
When it​ comes down to​ it,​ if​ you​ have the​ self-control to​ structure your budget similar to​ making bi-weekly payments you​ could actually save significantly more by doing it​ yourself than you​ would through one of​ these services .​
You will save more because the​ service will charge you​ a​ transaction fee for each time they process one of​ your payments (in some cases you​ may have a​ fee for each time that they receive a​ payment from you​ via direct deposit,​ for each time that they make a​ payment,​ and an​ additional fee for account maintenance.) Depending on​ how you​ budget your finances,​ you​ may also be able to​ pay off your mortgage even faster than you​ would through a​ payment service by simply setting aside slightly more than one half of​ your monthly payment every two weeks .​
This only applies if​ you​ budget your money,​ of​ course.




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