Do bi-weekly payments reduce the amount you pay on a mortgage only because you make an extra payment every year, or does it help also because you pay less interest because your balance is reduced twice a month instead of once a month?
2006-10-21 03:23:27 · 7 answers · asked by Shawn M 2 in Business & Finance ➔ Personal Finance
You pay less interest because your balance is reduced twice a month.
2006-10-21 03:29:55 · answer #1 · answered by chris 5 · 0⤊ 0⤋
It really doesn't matter your throwing an extra $500 a month.
You could pay 1/2 of your mortgage payment plus $250 every 2 weeks and you would be paying $6500 rather than $6000.
Some banks have restrictions on doing bi-weekly payment they charge a fee. Crazy isn't that.
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2006-10-21 11:59:51 · answer #2 · answered by T O 3 · 0⤊ 0⤋
The sooner you pay the loan payments the better. If you make one large payment at the begining of the month, that's better than two smaller payments later in the month. If you make one large payment at the end of the month, that's worse than two smaller payments earlier in the month.
The bi-weekly system works because you end up paying 13 full payments throughout the year....which is almost the same as paying an extra 10% each month.
P.S. It really doesn't matter all that much. The key is to pay extra and pay early.
2006-10-21 04:13:55 · answer #3 · answered by derek 4 · 1⤊ 0⤋
The mathematics is fairly simple, the more often a payment of principal is paid the less total interest is paid. If you pay only one payment at the end of the period plus interest to retire the debt your effective rate is the interest rate. If you make a series of payments during the period you are reducing the interest paying time a little. Your overall interest will be less. It is like an annuity in reverse.
2006-10-21 03:39:26 · answer #4 · answered by ikerol 1 · 0⤊ 0⤋
Talk to your lender about this one. My lender would always apply at the end of the month, regardless of when it was received so it was best to write a check the last week of the month. In this case, by paying early you would lose interest.
2006-10-21 06:14:30 · answer #5 · answered by Tony M 2 · 0⤊ 0⤋
if you pay 2X$250 it is better
your balance is lower halfway through the month therefore less intrest is incured on a smaller balance
just by paying the minimum amont per month but in 2 or more equaly spaced payments will take years off you loan
2006-10-21 03:32:26 · answer #6 · answered by exchange 3 · 0⤊ 0⤋
DITTO : on what "derek" said ! : )
2006-10-21 05:56:03 · answer #7 · answered by Kitty 6 · 0⤊ 0⤋