Uncategorized March 22, 2023

BiWeekly vs. Monthly Mortgage Payments

Hey everybody! What I wanted to answer today was a question I got was about biweekly payments. So most people don’t know what this is, but talk to your lender about this. Most loan servicers won’t tell you about this because it saves you money and they don’t make as much money on the interest. So they don’t want you to know, because everybody’s out to make some money. But ask your loan servicer, whoever you write your check to every month for your mortgage, about getting set up for biweekly payments and what’s involved with that. Typically it’s not something you can set up online. They don’t make it really easy to do. You have to call them and they have to set, or change how your payment is structured for the mortgage.

It doesn’t change the mortgage terms or anything like that. It just changes how often you pay into it. So what it is, is to compare it to something most people know. When you’re interviewing for a job, you usually ask “Do I get paid every month, do I get paid twice a month or every two weeks?” And for people who have asked that question, you know why it’s important? Because if you get paid every two weeks, that gives you two extra checks per year vs twice a month. So if you get paid every two weeks, you get 26 checks a year. If you get paid every, you know, twice a month, you get 24. So mortgages kind of works the same way. Instead of paying on the first of the month every month, if you were to split that up and say, okay, not only do I wanna pay twice a month, but I wanna pay every two weeks, what that does for you is it squeezes in an entire extra mortgage payment for the same calendar year.

So think about that longer term and if you’re familiar with an amortization table at all, and if you’re not just Google it, you can find some really easy amortization tables where you can add in extra, you know, if you pay a couple hundred dollars, what does that affect your payment? But by going from a monthly mortgage payment to biweekly payments, typically on average that will save somebody six and a half years on a 30 year mortgage. Yeah, seriously, I’m not kidding. So by not only paying that extra money, but you’re paying it sooner and you’re putting more towards principle but it doesn’t hurt as much as if you were to just write an extra mortgage payment check at the end of the year because you’re paying every two weeks. So it kind of squeezes that pay period a little bit shorter. And it also, he kind of helps the cash flow for your household. So instead of having this giant amount of money go out on the first of every month, it’s a little bit more level. Your bank account’s more even and you know how much money is in the accounts a little bit more. Even the checks aren’t as big. That may not matter to some people, but definitely talk to the people in your household that make the payments every month if that’s something that would benefit them.

Let’s take an example and say your monthly mortgage payment is $1800 and you were to split that up to biweekly payments of $900. So not only do you get that extra $1800 paid by the end of the year, but let’s say you’re able to round up a little bit and say, okay, well I’m gonna pay $1,000 every two weeks instead of the $900. If you’re able to do that, that extra $100 every check that you write goes straight to your principle. And if you’re not familiar with how an amortization table works, play with those calculators a little bit. I’ll put a link to a calculator. But seriously, paying towards your principle makes a huge difference on paying off your house a lot faster. Especially the sooner you can do that, the sooner you get to reap the benefits.

Anyway, definitely talk to your loan service or your lender about biweekly payments if you’re interested in interested in paying off your house a little bit faster and you’ve got some extra cash flow and your household monthly budget to mess around with. It’s a smart way to use your money and use your time. So any more questions about this, I’d be happy to answer them. Please feel free to contact me directly. My contact information is on my website and the link for that is here. Thanks so much for the time, just trying to help y’all save some money and have a great day!