Making Mortgage Payments Weekly Vs Monthly

You may want to consider making mortgage payments weekly if you want to pay your home loan off faster. By making a payment every two weeks, you can take years off of your term. You will be free from your debt much faster than if you made monthly payments.

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When you decide to make mortgage payments weekly as opposed to monthly, you end up cutting your monthly payments in half, and you pay that amount every two weeks. So if your normal payment was 00, then you would pay 0 biweekly. The reason you end up paying your home loan off sooner is because instead of making 12 payments, you are making 26 payments. With monthly payments, you would end up paying ,000 per month, whereas with biweekly payments, you would end up paying ,000 at the end of the year.

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You can also reduce the amount of time it takes to pay your loan back by using mortgage cycling. In the book "Mortgage Cycling Revealed" it explains how to do it. Basically while you are making your normal payments, you put money away and save it. When this money gets to be a large amount, you put it onto your home loan in a lump sum. There have been many people who have successfully paid their loan off in as little as ten years using this method.

Your home is a very important part of your life. Getting it paid off quickly can do a lot to take that stress off of you. When you make your mortgage payments weekly or if you use the cycling method, you can have that debt paid off faster so that you can use your money for other things. Most of us have to deal with a large loan sometime, so why not get rid of it as soon as you can?

Making Mortgage Payments Weekly Vs Monthly

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What Advantage Is There With Mortgage Plans That Have Bi-Weekly Payments?

Some mortgage companies allow you to set up your mortgage so that you are making bi-weekly payments. This allows you to pay off your mortgage at a much faster rate. While certainly not for everyone, here are some things that you need to know as to why you may want to consider getting your mortgage with bi-weekly payments.

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The most beneficial bi-weekly payment option, which is a true bi-weekly mortgage payment plan, will take payments out every two weeks. Yes, they like the automatic payments - probably better for you, too, that way you do not have to worry about late payments. The first payment is half of your monthly mortgage payment, and then the second one is also half. All together, you will have paid the equivalent of 13 months of payments in only 12 months.

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The difference in programs that have bi-weekly payments makes a real difference in how much you end up paying. This means that you need to understand exactly what happens with the payments when the company gets them. What you want is to have your lender apply the payment to the mortgage on the very day that they receive it. This will give you a nice reduction in interest.

Other lenders, not wanting to lose some of that sweet interest, put your payments into another account, and then when they have a full payment for each month, pay for that month. Also, at the end of the year, when they have the full 13th payment, then it gets applied. What a difference it will make over the years in the interest that you pay when the lender fools around like this with your money. What you want is for the payment to be credited to your account when you make the payment.

A similar effect can be obtained if you make an extra payment each year on your own, but the savings will not be quite as good. Being that with a real bi-weekly payment plan, you could pay off a 30-year mortgage in about 18 to 22 years, the potential savings are tremendous. It is possible to save about ,000 for each 0,000 that is owed.

Anytime that you make extra payments on your mortgage - the effect is the same - reduced interest rates. Bi-weekly payments allow you to have big savings on your mortgage, and will also allow you to build up equity in your home at a much faster rate, too.

If you already have a mortgage, your lender may not allow you to easily switch to a plan with bi-weekly payments. Since it involves more work for them, they may not want to be bothered and may not even offer such a program. Even if they have it, about the only way some lenders would allow you to make the change would be for you to refinance your mortgage and then all fees would apply, including points.

A bi-weekly payment mortgage plan is also a little higher in interest because of the added work for the mortgage lender. Be sure to look at all the fees that may apply, and then compare offers thoroughly before you buy.

What Advantage Is There With Mortgage Plans That Have Bi-Weekly Payments?

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How Bi-Weekly Payments Can Pay Off Your Mortgage Faster

Biweekly (or fortnightly) payments seem to be the fad of the moment. Everyone's talking about how great they can be for paying your mortgage off faster. Some companies are even charging exorbitant fees to show you how good they can be for reducing your debt.

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But do you know why they're such a good idea?

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Did you know there's also a trap some banks can set for your bi-weekly payments that seriously STOP you from getting ahead?

We're going to look at some of the good and bad points of biweekly (fortnightly) repayments and how they really can help you save thousands of dollars.

How the BiWeekly Method Works

Before we start trying to alter payments or avoid bank traps, it's a good idea to understand how and why fortnightly payments work.

Let's look at a simple example:

If your mortgage payment was ,000 per month - then you would pay 12 payments per year, which is ,000 per year. Easy, right?

Let's say you decided to pay half your mortgage payment (0) twice a month, then you would pay 24 payments per year, which still adds up to ,000 per year.

Okay - instead of opting to pay once a month or even twice a month, let's say you decided to pay half of your mortgage payment every second Thursday (or on the same day every second week), then by the end of the year you would have made 26 - not 24 - payments of 0 - which is ,000 per year . That's one extra payment per year coming off the amount you owe on your mortgage.

No matter what loan amount, if you work out your repayments this way, it will always come out as one extra payment per year.

The reason this works is because not every month has exactly 28 days in it. Grab a calendar and count how many Thursdays you see. Most months will have four. Some months will have five Thursdays (usually two months every year). The same should work for any day of the week you choose.

Does it Work Every Time?

Let's look at an example mortgage. (We'll base this on 0,000 at 6.5% over 30 years). Our minimum repayment for this mortgage is ,580.17 per month. Over 12 months, we would have paid ,962.04.

Now let's cut the monthly figure in half. We will now pay 0.08 per fortnight (biweekly). If you pay the half monthly figure every second week for a year, you get: 0.08 x 26 fortnights = ,542.08

(did you notice that it's still exactly one extra payment per year?
,542.08 - ,962.04 = ,580.17)

So - if I put this new repayment amount into our mortgage calculator, it tells me that I could pay my loan off in 24.2 years - that's almost 6 years off the loan term - and I could save ,710 in interest, just by paying biweekly instead of monthly!

Every Cent Counts

Let's see what kind of difference rounding up our minimum fortnightly payment by a few cents can make.

Minimum fortnightly (biweekly) payment = 0.08

Let's round this figure up and pay an even 0 per fortnight. That's only .92 per fortnight extra. Everyone should be able to afford an extra .92 a fortnight - gee, that's only 0.70 cents per day!

Now we have the double benefit of paying biweekly payments, plus adding a few cents to the payment amount.

According to our mortgage calculator, your new loan term should be 23.4 years and you should have saved ,200 in interest over the term of the loan.

Every cent really DOES help, doesn't it?

How Bi-Weekly Payments Can Pay Off Your Mortgage Faster

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Why Should I Choose Bi-Weekly or Weekly Over Monthly Mortgage Payments

When you purchase a property and arrange a mortgage with a bank or other lending institution, one of the decisions you will make will be to decide the frequency of your mortgage payments.

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The most common options are weekly (mortgage payments are made once a week, i.e., every Friday), bi-weekly (every second Friday), monthly (the 1st day of each month) or semi-monthly (the 1st and 15th of each month).

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When you choose monthly mortgage payments, you will make one mortgage payment every month for 20 or 25 years, until your mortgage has been paid in full. For example, if you arrange a mortgage for 0,000.00 at 6% interest, you will make monthly mortgage payments of ,279.61 every month for 25 years.

Semi-monthly mortgage payments are similar to monthly mortgage payments, where you make 2 mortgage payments per month, each and every year for 25 years. In the above example, you would have semi-monthly mortgage payments of 9.80 for 25 years.

If you have any interest at all in paying off your mortgage earlier than 25 years, you might want to consider choosing bi-weekly mortgage payments instead of monthly. Most people who choose bi-weekly mortgage payments, usually have the payment coincide with when they get paid. If you get paid every second Friday, you can have your bi-weekly mortgage payment come directly out of your bank account every second Friday, as well. One obvious benefit to this is that you will always have the money in your account to make your mortgage payment.

Another benefit to this frequency choice is that is allows you to pay off your mortgage sooner rather than later. For example, if you arrange a mortgage for 0,000.00 at 6% interest, you will make bi-weekly mortgage payments of 9.80, but your will only make those payments for 21.1 years. You actually save yourself 3.9 years of mortgage payments, or approximately ,876.23!

One thing to remember, though, is that you will be making two extra mortgage payments every year. This is why choosing bi-weekly saves you so much time and money. On those months when you get three paycheques (happy day!), you actually make three mortgage payments. So, while unfortunately all of your extra pay is not free for you to spend, some of it is and some of it is saving you serious money in the long run.

Weekly mortgage payments act the same as bi-weekly mortgage payments. Your mortgage payments are half as much as your bi-weekly payments, and you make four extra payments per year, resulting in the same savings of time and money as in the bi-weekly example.

Imagine having an extra ,876.23 to spend, or almost 4 years of not having to make a mortgage payment. What will you do with all of that extra money?

Why Should I Choose Bi-Weekly or Weekly Over Monthly Mortgage Payments

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Bi-Weekly Mortgage Payments

Bi-weekly payments can greatly reduce the time it takes to pay off a thirty year mortgage. By making twenty six payments a year, borrowers make one additional payment each year. This extra payment can accelerate the loan repayment and potentially save an individual thousands of dollars in finance charges.

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Some mortgage companies and banks will charge their customers to set up a bi-weekly payment plan but most do not. Borrowers can contact their lender to verify if any additional charges apply. If a mortgage company charges an additional fee for bi-weekly payments, a borrower may be able to submit an extra payment a year at no charge. The check for the extra payment should state that, "this payment should be applied to the principal". If the check does not state that the payment should be applied to the principal, than the mortgage company is likely to apply it to the interest and the borrower would forgo the benefit of the additional payment. Again, borrowers should contact their lender to verify if any additional charges apply for an additional annual principal payment. If you're either in the process of refinancing or obtaining a home loan for a purchase, you may want to inquire with your lender about additional fees that may apply to bi-weekly mortgage payments. Make sure you receive any information in writing for future reference. This information does not constitute financial, investment or tax advice.

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This information is for general informational purposes only and does not attempt to give advice to your specific circumstances. You are advised to discuss your specific situation with an independent financial adviser before making any decisions.

Bi-Weekly Mortgage Payments

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