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How Can Bi-Weekly Payments Help Me?

Most mortgages run about fifteen to thirty years, and monthly payments vary on APR and location. But the percentage of your payment that actually applies to principal, or the cost of the home, can be under fifty percent of what you pay every month. Everyone wants to pay off their home sooner, but may not have been able to afford the monthly payments for a shorter time-span on their loans.There are basically two alternatives. The first is paying more than the amount of your monthly payment every month; this will allow you to apply a lot more of your payment to principal, and clear out your home loan even faster. However, some loans charge fees for early payoffs that can make your extra payments not worth the effort. It may be a good option for a person on varying pay plans, such as a commission, to pay off more when they can.The other alternative is a bi-weekly payoff plan. A bi-weekly pay off plan is a schedule when the borrower pays every two weeks, instead of every month. A bi-weekly plan means the borrower will pay for one extra month a year, paying their loan off sooner than a traditional monthly payment.How does that work out? Say your monthly payment is $900. You pay $900 to the loaner 12 times a year. However, a bi-weekly schedule means you pay 26 times a year, and only pay $450 per payment, which equates to 13 $900 payments per year, instead of 12.Can it really make that much of a difference? You bet! On a 30 year loan of $100,000, with an interest rate of 7%, you save about $34,000 total over 30 years in interest payments, and you will pay off your loan in about 24 years, instead of the whole 30.But bi-weekly payments are not for everyone; if you cannot afford to make payments every two weeks, it may not be the payment schedule for you. Also, if you currently have a monthly loan, you will want to check with you lender first, before switching to a bi-weekly schedule. This change may require some paperwork on your part, and may change some of the terms of your loan. If your lender requires too much for the change, you may want to consider simply making one whole extra mortgage payment a year; you do not need permission from your lender to pay mortgages early.

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