BI- WEEKLY MORTGAGE PAYMENT

The payment option commonly called 'bimonthly' is a bi-weekly payment option. However, some lenders offer a bimonthly payment service to homebuyers. With true bimonthly (or semi-monthly) payments, you pay half of the monthly payment twice a month (for example, you pay 1/2 of the monthly payment on the 1st of the month, and the other half on the 15th). There will be a total of 24 semi-monthly payments in a twelve-month period and the lender must not hold the payment until the end of the month and apply it to the loan balance right away.
Semi-monthly or bi-monthly payment plans don't achieve the same results as the bi-weekly payment plan and are rarely used. On a 30 year fixed mortgage, for example, it will take 29 years and 11 months to pay off (1 month sooner than a standard payment plan), and you will save only one month's interest.

Please note that if your lender withdraw half of the monthly payment from your bank account every half of the month, but apply the payments to your loan only once a month (as they did before), you will save nothing at all. This kind of bi-monthly payments, however, allow you the flexibility to schedule your monthly payments in a way that works better with your personal finances.

With bi-weekly payments, you pay half of the monthly mortgage payment every 2 weeks, rather than the full balance once a month. This is comparable to 13 monthly payments a year, which can result in faster payoff and lower overall interest costs. For example, the bi-weekly mortgage payment process can pay off a 30 year loan in approximately 19 years:

If you make bi-weekly mortgage payments on a 30 year amortized loan, you will end up saving 5-7 years worth of interest throughout the term of your mortgage.

Bi-weekly payments can be a tremendous tool for consumers who want to pay their 30 year mortgage loans off quicker than 30 years, but can not afford to always make larger monthly payments to pay the principal down quicker. With bi-weekly payments 1/2 of your mortgage payments will be deducted from their bank account every 2 weeks. Once every 6 months there is a month with 3 Friday bi-weekly periods in a month. When this happens, this is where the extra money comes from to pay your mortgage loan off quicker.

Many borrowers will also apply their income tax return towards there mortgage. Along with bi weekly mortgage payments this will give you an extra reduction in principal every year and help you pay off you mortgage faster.

A bi-weekly mortgage payment is made every two weeks. The 26 half payments in a year are the same as thirteen monthly payments instead of the usual twelve. The biweekly can help pay off a loan faster saving
interest costs.

Don't pay a higher interest rate for a bi-weekly mortgage! Instead, consider increasing each monthly payment by 1/12 and the end result is the same as a bi-weekly mortgage, but the savings are greater than if you took a higher rate for the bi-weekly "option".

» DISCLAIMER: The information contained in this article on 'BI- WEEKLY MORTGAGE PAYMENT' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.