Bi-Weekly Mortgages
For people willing to make a
half payment from each paycheck, this loan offers rapid
building of equity. The biweekly
mortgage is usually a
30–year fixed rate mortgage.
What’s different is that
payment for half the monthly amount is made every two weeks.
In this way, you make the equivalent of 13 months worth of
payments every year.
Also, because your payments
are applied to the loan every 14 days, the principal amount
decreases faster, saving even more in interest costs. As a
result, your loan term shortens to 22 or 23 years, providing
a substantial decrease in total interest costs.
For example:
Monthly
mortgage payment (12
months/12 payments): $997
Interest paid over the life of the loan: $209,263
Paid off in 30 years
Half payment (13 months/26
payments): $498 ($997 / 2)
Interest paid over the life of the loan: $155,938
Paid off in 22-23 years
Interest savings over the
life of the loan are $53,325 – paid off in 22 -23 years
instead of 30 years!
You can get a biweekly
mortgage, or you can actually calculate the additional
amount to pay on the principal each month on your own. If
your monthly
mortgage payment is $997, adding $83 a month
($997 divided by 12) toward the principal would result in
the same interest savings as the biweekly mortgage. The loan
would still be paid off about seven years early, but you
wouldn’t have to commit to making payments every two weeks.
Mortgage Glossary6
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