If paying off your mortgage earlier and saving money sounds good to you, you may want to consider bi-weekly mortgage payments. This week we are going to talk about the benefits of bi-weekly payments, why they are good and how they work.
Simply put, bi-weekly mortgage payments are your monthly mortgage payments, but they are made every two weeks instead of once a month. For example, let’s use a 30-year mortgage of $250,000 at a 4% interest. With bi-weekly mortgage payments, you will pay $30,000 less in interest and pay off your loan in 23 years instead of 30 years. In 7 years, you will have saved $10,000.
This is how it works. Instead of making 12 mortgage payments a year, you are making 13, thus reducing the amount of your principal. Some months have 5 weeks and the extra weeks mean extra payments.
So how do you set up bi-weekly payments? You can simply contact your mortgage lender and ask to be set up on bi-weekly payments. If your lender does not offer this option, you can figure it out for yourself with this formula. Let’s use a $1000 monthly mortgage for an example:
$1000 x 13 (Total payments for the year) = $13,000
$13,000 ÷ 26 (Total # of payments for the year on a bi-weekly plan) = $500
Your bi-weekly payment plan: $500 payment made every 2 weeks.
Some may find that budgeting smaller payments works better for them. But, in order to take advantage of the benefits of bi-weekly payments, you must be one month ahead to stay current on your mortgage.
If you would like to know how bi-weekly mortgage payments can save you money, the easiest option is to visit our new website at SnapSendandSave.com. Just Snap a shot of your mortgage statement, Send it to us, and Save. And as always, you can call me, Dwayne Stein, at my day job 504-207-7600 or at [email protected]. Prayers for everyone and stay safe!