Well, it’s true! Pardon the exclamation point. You probably thought I was going to say it was a bunch of baloney like most gimmicks you hear about.

It’s also fairly easy to set up a biweekly mortgage plan, which requires a payment every two weeks as opposed to every month.

In short, biweekly mortgage payments are a sort of accelerated mortgage payoff system that allow you to make an extra monthly payment each year and in turn save money on interest and pay your mortgage faster.

How Biweekly Mortgage Payments Work

Monthly mortgage payment: $2,000 Total paid annually: $24,000 Biweekly payment (payment made every 2 weeks): $1,000 Total paid annually: $26,000 Result: One extra payment made each year!

Instead of making a single monthly mortgage payment each month, or 12 payments per year, you make a half mortgage payment every two weeks.

And because there are 52 weeks in a year, that equates to 26 half payments annually, or 13 total monthly mortgage payments .

Let’s pretend you’ve got a 30-year fixed mortgage; if your monthly payment were $2,000 per month, under one of these payment plans you’d pay $1,000 every two weeks.

That extra $2,000 equates to one payment – and because it is allocated throughout the year, it pays down your mortgage balance earlier than scheduled, which saves you interest and builds home equity sooner.

This can be especially useful if mortgage rates are high, but less so if you’ve got a rock-bottom rate that isn’t costing you much money.

Of course, it’s not that simple. Nothing ever is. You can’t expect the bank or mortgage lender to allow you to mail in a half payment twice a month, that simply won’t fly.

Your bank or loan servicer (whoever handles your mortgage) will likely ask you to set-up a biweekly payment system with an intermediary, which acts as a liaison between you and your lender.

But these biweekly payment companies can get expensive, especially when they charge a set-up fee of anywhere from $200-$500 and then an additional fee for each transaction.

Fortunately, some banks and credit unions may offer the service in-house for free so you https://yourloansllc.com/bad-credit-loans-la/ don’t have to worry about the fees.

Always inquire with your loan servicer first before seeking out an outside company. No sense is paying for a service you can get free of charge.

So what are the benefits of a biweekly mortgage anyway?

– you can increase the amount of equity in your home at a faster rate – you can save money by paying less interest on your mortgage – you can reduce the term of your mortgage and own your home sooner – your mortgage payments are automated and made simple – more frequent payments decrease the outstanding principal loan balance faster

And the drawbacks…

– you put more of your hard-earned money toward the mortgage each month (and year) – that money is now locked up in your property – not everyone actually wants to pay down their mortgage faster (or at all) – there – you might be better off making a lump sum payment early in the year instead – you might be able to put your money to use elsewhere if you have a low mortgage rate

So you’ve thought about it and like the benefits a biweekly mortgage affords, but it seems somewhat defeatist to pay someone to help you save money on your mortgage right? Right.