Should You Make Bi-Weekly Mortgage Payments?
Paying off your mortgage early can come with a host of benefits. You can free up money for travel or retirement, tackle other debts, or even financially protect yourself from losing your home. However, achieving these can be difficult without the proper planning or budgeting.
Alternative options to quickly paying off your mortgage can be a step in the right direction. Rather than paying monthly, you might consider making bi-weekly mortgage payments.
What are Bi-Weekly Mortgage Payments?
Bi-weekly mortgage payments allow you to submit a payment twice per month. For example, if you usually make a $1,000 monthly mortgage payment, you will instead make a $500 mortgage payment every two weeks. Essentially, you are paying half your monthly amount every two weeks.
Because there isn't a standard amount of days per month, this equates to 26 biweekly half payments or 13 full monthly payments. Although you will be making one extra full payment per year, you can budget to alleviate any financial strain this payment could cause.
Benefits of Bi-Weekly Mortgage Payments
There are several key benefits to bi-weekly mortgage payments. For one, you can build equity faster. Home equity is the amount of your home that you own versus how much you owe your lender. The extra payment made goes toward reducing your loan balance. This will give you a boost in building equity and can allow you to take out a home equity loan if you find yourself needing to finance home repairs, consolidate other debt, or pay for a child's college education.
Another benefit is that you will pay less interest over time. During the first few years after taking out a mortgage, most of the money will be going toward interest, while little will be going to reducing the balance of your loan. This process is known as amortization. Since you will be making an extra payment each year, you can pay down your principal amount even faster. This means that each interest payment afterwards will be smaller.
Bi-weekly mortgage payments allow you to pay off your mortgage faster. This is because you will slowly be paying off your principal balance faster than normal. Lastly, these payments will make it easier for some people to budget and can help you save on stress.
Understanding Your Options
Whether you choose to follow a standard monthly mortgage payment or conduct bi-weekly payments, there are plenty of options to choose from. For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Central Florida. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.
