What is a Biweekly Mortgage?
A Biweekly mortgage is a loan in which payments are made every two weeks instead of monthly. Payment options include monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly, and accelerated weekly. The majority of biweekly payment plans are provided by third parties for a cost. While making biweekly payments will shorten the loan term and total interest paid, you can achieve the same results by making an extra mortgage payment each year.
The Biweekly payment equals one-half of a monthly payment. A biweekly mortgage payment plan frequently saves the customer money over the life of the loan, albeit it depends on other factors such as the loan’s interest rate.
Biweekly Mortgage Definition
A biweekly mortgage is a loan that permits the borrower to make payments every two weeks instead of monthly. A biweekly mortgage requires the borrower to make payments every two weeks, for a total of 26 payments. As a result, the loan will be paid off faster with 13 complete payments made over a 12-month period.
How does a Biweekly Mortgage Work?
Over the course of a year, a biweekly mortgage allows the borrower to make the equivalent of one extra month’s mortgage payment. If a borrower’s monthly mortgage payment is $1,200, the biweekly mortgage equivalent would require the borrower to make two payments of $600 every two weeks. Although making 26 half payments will help you pay off your mortgage faster, there are certain benefits and drawbacks, especially in terms of how the payments are used by the mortgage servicing firm.
What are the advantages of a Biweekly Mortgage?
By paying one extra payment every year, borrowers can pay off their mortgage sooner. If the borrower takes up a biweekly mortgage, the loan will be paid five years faster than if the borrower took out a monthly mortgage. Over time, the extra payment per year adds up, allowing the borrower to purchase the home sooner.
A monthly mortgage saves money on interest, which is a considerable benefit. A bimonthly mortgage not only pays off the loan faster, but it also saves the borrower in interest over the loan’s term.
What are the disadvantages of a Biweekly Mortgage?
Some mortgage providers keep the first payment of the month and wait until the second payment arrives before forwarding both payments to the lender, therefore offsetting the benefit of a biweekly mortgage. In other words, the payments may not be applied to the loan every two weeks. The biweekly mortgage (delivered monthly) would, however, assist the borrower in making one additional payment per calendar year.
To compensate for the missed interest owing to the borrower paying the loan off sooner, some lenders and mortgage providers impose a fee to set up a biweekly mortgage.
A biweekly mortgage also entails a clear commitment to pay every two weeks. It is usually not possible to adjust it from month to month. As a result, borrowers must assess whether they are able to commit to the additional payments, as well as how frequently they are paid by their companies and their other monthly expenditures.
Biweekly Mortgage Calculator
Use our Georgia Mortgage Payment Calculator to calculate Bi weekly payments. Our calculator will assist you in comparing the prices of a loan that is paid off bi-weekly against a loan that is paid off monthly. This can be used for any sort of loan, including mortgages. A biweekly mortgage calculator is also available.
For more information on Biweekly Mortgages, contact the mortgage experts at Mortgage Rates Today!
Financial Consultant and Author