Does It Improve Credit Rating?

Does It Reduce the Interest?

How Does the Math Work?

What's the Downside?

Is Making Biweekly Mortgage Payments a Great Idea?

Suzanne is a content online marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps establish content methods.

If you are a property owner with a standard mortgage who makes regular monthly payments on your home, you might have heard about biweekly mortgage payments as an option to traditional payment plans. The logic is that increasing the frequency of the payments minimizes the interest that constructs up and, over the course of a 30- or 15-year mortgage, that can equate to years of payments gotten rid of from your loan. However, biweekly mortgage payment programs typically bring extra costs and need accepting a larger payment quantity.

Before you register for biweekly payments, it 'd be smart to weigh the benefits and disadvantages of this kind of program to determine whether it will really conserve you any money.

- Some biweekly payment programs provided by lenders are not the very best monetary choice for the house owner.
- Committing to biweekly mortgage payments can be hard on a tight budget.
- Biweekly mortgage payments won't necessarily enhance your credit history.
- Making additional payments towards the principal of your mortgage is a way to lower your interest payments over the life of the loan. You do not need a formal contract to do this.
- In any case, make certain your mortgage does not come with an early prepayment penalty. That will damage any strategy for settling the loan early.

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Will Switching to Biweekly Payments Boost My Credit Report?

Using a biweekly payment schedule set up by your mortgage loan provider puts you on an automated withdrawal strategy that guarantees that your payments are made on time.

If you're the kind of individual who misses payments from time to time due to the fact that you forgot to compose the check, an automated payment schedule will enhance your credit since your payments will be on time. However, you can get the exact same benefit with an automatic regular monthly payment.

Will Biweekly Payments Reduce the Interest I Pay?

The idea that biweekly payments will reduce your interest payments might be a myth. Why? Because, depending on the details of your loan, there is a great chance that the business receiving your mortgage payment isn't the business that holds the loan.

Although you're paying twice monthly, the servicer receiving your payment isn't making biweekly payments to the business that owns your loan. It's more most likely that they're most likely holding the payment in an account up until the end of the month.

But will you still be reducing the interest that is developing up over time? Yes. Bear in mind that each calendar year has 52 weeks. If each month has 4 weeks that equals 48 weeks. So, biweekly payments do not include 2 payments each month but rather include up to 26 half payments-the equivalent of 13 regular monthly payments in a year.

Some mortgage companies do not accept biweekly payments on mortgages, so you should ask ahead of time before signing up for a biweekly payment plan through a third-party lender.

How Does the Math Deal With Biweekly Mortgage Payments?

It works like this: Biweekly payments are equal to 13 month-to-month payments in a year, while standard regular monthly payments are equal to 12 payments each year.

By paying an extra month every year, you're paying additional principal, which shaves six to eight years off the life of the loan gradually.

But do you have to make biweekly payments to do that? Instead, you could divide the overall of one month's payment by 12 and include that amount to your regular monthly mortgage payment.

If you're paying $1,500 each month, divide 1,500 by 12 and make your regular monthly payment $1,625. Talk to your mortgage business first to make sure there isn't something more you need to do to make sure the extra cash is applied to the primary amount of your loan.

What's Wrong with Biweekly Mortgage Payments?

There are potentially two problems with going with a lender's biweekly payment program:

- There are frequently charges connected to this payment plan. That consumes into the amount you're conserving by accelerating your payment schedule.

- You might, like many American customers, currently have enough contractual payment responsibilities in your life. Unless you have substantial monetary reserves, you may wish to keep some flexibility in your budget rather than committing to biweekly payments.

Remember, you can constantly make an additional payment when you get 3 incomes in a month, get a tax refund, or enter a windfall. You do not have to contractually obligate yourself to do it on a monthly basis.

Why Are Biweekly Mortgage Payments an Excellent Idea?

There are a couple of benefits to biweekly mortgage payments. They include:

- Settling your mortgage much faster, and paying less interest over the life of the loan.

- Building equity in your home faster.


What Are the Downsides of Biweekly Mortgage Payments?

Signing a formal contract to make biweekly mortgage payments has a couple of potential downsides:

- There are often charges involved and they will eat into the quantity you're saving by increasing your yearly mortgage payment.

- You're locking yourself into a commitment to pay a larger amount every year. If your budget takes a hit from another direction, you might regret that.


What Are Other Ways I Can Pay Down My Mortgage Faster and Cheaper?

You can pay off your mortgage earlier and decrease your interest expenses without dedicating to a biweekly mortgage payment. For example, you can use a perk or an unexpected windfall to settle a piece of your mortgage. If you get a tax refund, put the money against your mortgage.

Whatever you do, make certain that you contact your mortgage holder in advance and ensure that your additional payment will be applied against the principal of your mortgage loan.

There are ways to pay down a mortgage without signing up for a plan that might come with fees attached. The advantages may not exceed the gains of a biweekly mortgage.