After establishing a new mortgage, a borrower has a number of choices to make regarding payment methods. He can pay online, in person or through the mail. One other option a borrower may have is to make biweekly payments. A borrower should explore how biweekly payments can help with a mortgage to decide if this arrangement works for him.
What Are Biweekly Payments?
A normal mortgage arrangement requires the borrower to pay once per month. But with a biweekly arrangement, the borrower pays twice per month instead. He must divide the monthly payment by two and submit that amount every other week. For instance, if the monthly payment is $1,000 the mortgage borrower must pay $500 one week, then another $500 two weeks later and continue that action throughout the year.
How Does It Help ?
Paying a mortgage biweekly deletes years off of the mortgage term. Instead of making 12 mortgage payments per year (the total amount due each month), the borrower makes 13. The extra payment goes toward principal, which reduces the loan balance more quickly (about six to eight years early). So paying biweekly helps relieve the borrower of the debt faster so that he can own the home outright and put his money toward other financial needs (like retirement or investing) sooner.
Convenience and Discipline
A biweekly arrangement could help keep the borrower disciplined when it comes to his mortgage. If paid weekly or biweekly, the borrower can simply set up biweekly automated withdrawals from his bank account (if available) on each pay day. This way the borrower does not have to store the money for his mortgage payment in his account until the next month and won't risk spending the money on other items during the month.
Considerations
Unfortunately, not every mortgage lender permits biweekly payments. Some lenders attach prepayment penalties to the loan, so the borrower would have to pay additional monies if he finished paying the loan early. Some lenders simply prefer to receive a once-per-month payment. If allowed by the lending agreement, the borrower must sign up for a biweekly payment plan and get instructions for how and when exactly to submit payments. The bank may also charge an additional fee for this arrangement.
0 comments:
Post a Comment