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 marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and assists develop content strategies.

If you are a house owner with a standard mortgage who makes regular monthly payments on your home, you might have found out about biweekly mortgage payments as an alternative to standard payment plans. The logic is that increasing the frequency of the payments reduces the interest that develops and, over the course of a 30- or 15-year mortgage, that can equal years of payments removed from your loan. However, biweekly mortgage payment programs generally carry additional charges and require accepting a bigger payment quantity.

Before you sign up for biweekly payments, it 'd be smart to weigh the benefits and disadvantages of this kind of program to determine whether it will in fact save you any cash.

- Some biweekly payment programs provided by lending institutions are not the finest financial choice for the house owner.
- Committing to biweekly mortgage payments can be hard on a tight budget.
- Biweekly mortgage payments won't necessarily improve your credit rating.
- Making additional payments towards the principal of your mortgage is a way to minimize your interest payments over the life of the loan. You do not require an official contract to do this.
- In any case, make sure your mortgage does not included an early prepayment charge. That will harm 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 lending institution puts you on an automated withdrawal plan that ensures that your payments are made on time.

If you're the type of person who misses out on payments from time to time because you forgot to compose the check, an automatic payment schedule will improve your credit since your payments will be on time. However, you can get the exact same advantage with an automated regular monthly payment.

Will Biweekly Payments Reduce the Interest I Pay?

The idea that biweekly payments will lower your interest payments might be a misconception. Why? Because, depending upon the details of your loan, there is a great chance that the company getting your mortgage payment isn't the company that holds the loan.

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

But will you still be reducing the interest that is developing gradually? Yes. Keep in mind that each calendar year has 52 weeks. If monthly has 4 weeks that equates to 48 weeks. So, biweekly payments don't consist of 2 payments each month but rather add up to 26 half payments-the equivalent of 13 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 Work on Biweekly Mortgage Payments?

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

By paying an extra month every year, you're paying extra principal, which shaves 6 to eight years off the life of the loan with time.

But do you have to make biweekly payments to do that? Instead, you might divide the total of one month's payment by 12 and add that total up to your month-to-month 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 certain there isn't something more you need to do to ensure the additional money is used to the primary quantity of your loan.

What's Wrong with Biweekly Mortgage Payments?

There are potentially 2 problems with choosing a lending institution's biweekly payment program:

- There are typically fees connected to this payment plan. That consumes into the quantity you're saving by accelerating your payment schedule.

- You may, like the majority of American customers, currently have adequate legal payment commitments in your life. Unless you have considerable monetary reserves, you may wish to keep some flexibility in your budget plan instead of dedicating to biweekly payments.

Remember, you can constantly make an additional payment when you get 3 paychecks in a month, get a tax refund, or enter a windfall. You don't have to contractually obligate yourself to do it each month.

Why Are Biweekly Mortgage Payments a Great Idea?

There are a couple of advantages to biweekly mortgage payments. They consist of:

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

- Building equity in your house faster.


What Are the Downsides of Biweekly Mortgage Payments?

Signing an official contract to make biweekly mortgage payments has a number of potential disadvantages:

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

- You're locking yourself into a commitment to pay a bigger quantity every year. If your budget takes a hit from another instructions, you might be sorry for that.


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

You can settle your mortgage earlier and decrease your interest costs without dedicating to a biweekly mortgage payment. For instance, you can use a perk or an unforeseen windfall to settle a chunk of your mortgage. If you get a tax refund, put the cash versus your mortgage.

Whatever you do, make certain that you call your mortgage holder beforehand and make sure that your additional payment will be applied versus the principal of your mortgage loan.

There are methods to pay down a mortgage without signing up for a plan that might include fees connected. The benefits might not exceed the gains of a biweekly mortgage.