The biweekly mortgage is an old concept but the recent media glare on the real estate industry in general and the mortgage industry in particular, the biweekly has become the center of focus. Many home owners take advantage of this easy, but potent method of hastening up the procedure of the principal payment. Here is a brief overview of this most useful mortgage in the market.
A biweekly mortgage is a simple and efficient method of raising the equity in a home. It can also reduce the duration of the mortgage significantly. This is possible with nearly the same monthly mortgage payment, making it easily affordable to average home owners. The only barrier is to go ahead with it.
Biweekly implies the homeowner has to pay every 2 months, in lieu of once a month. Actually all you should do is to divide your monthly payment into two and then pay this amount after every 2 weeks. This method actually saves you money, since you are really paying a higher portion of the principal each year, when you pay after every 2 weeks. This is how the method works:
1. Each year contains 52 weeks, means you actually pay 26 times annually.
2. If you go for the monthly payment, you actually pay 24 payments every year.
3. Additional 2 payments are used to repay your principal.
4. Since this method speeds up the repayment of the loan and every month the principal is repaid at a faster rate.
The excellent thing about this mortgage is that as each month comprises just over 28 days/4 weeks, the biweekly mortgage payments do not tax any home owners. The maximum additional days a month are 3 or 0 or 1 additional day.
But many people do not take advantage of this type of mortgage either because they are unaware of it or they think that they can repay any additional principal whenever they want, instead of paying biweekly.
However a big majority of people do not attempt to pay any additional part of their principal. They have it in their thoughts but make no attempts to fructify it. They think there are other far crucial things where this money can be utilized. But they do not realize that a small amount they pay towards the principal will make a significant difference.
Discipline plays an important role here. For a disciplined person, a biweekly mortgage plan is not necessary. It does not mean people not going for a biweekly do not have any discipline. But this mortgage is designed for people who want to reduce their mortgage principal but cannot get around to it. At today’s prices, a homeowner saves more than $50,000 and reduces the term of the mortgage by 5 years.
Tags: Biweekly, Biweekly Mortgage