I'm confused about bi-weekly mortgage payments?

Question

I understand that you save more money by making 1/2 of your monthly mortgage every two weeks. Now my question is, do you have to make this payment twice a month or every two weeks? There is a difference of a full payment each year. Obviously I'd still save more by making payments every two weeks because I'd have that extra full payment every year, but do you still save by making those 1/2 payments twice a month or do you have to do it every two weeks?

Answer 1

The entire premise behind bi-weekly mortgages is to make that 13th payment every year.

Many bi-weekly plan sellers will say that they apply your payments every two weeks, but in practice that almost never is the case. Your excess money builds until they slap a big chunk down once or twice a year.

Many banks will charge a set-up fee to enroll in a bi-weekly plan, and most will also charge you a fee every single time they pull money from your account. $5 every two weeks adds up in a hurry.

You can have almost identical results by simply calculating 1/12th of your mortgage payment, and adding that amount to every monthly payment you make. At the end of the year, you will have paid 13 payments. In most cases, this will take a 30 year loan down to about 22.5 years, and save you tens of thousands of dollars in interest.

The bi-weekly is ok for people that don't have the discipline to make the extra payments. Too many people think they'll send an extra check in December, but the holidays hit, travel plans get made, and it never happens. But the extra fees make it rarely worthwhile.

Not to mention, few people are paid every two weeks. But the bank will yank money out every two weeks, so if you bounce one, or go underwater on your bank balance, you could end up with an NSF charge of $30 or more. Do that a couple times a year and you're really costing yourself.

Paying one half of your payment twice a month will not help you at all, don't do it.

Answer 2

Yes you will save much more in interest because of the way interest is accumulated- every day. Because you are making a payment every 2 weeks you are lowering the principal balance for the interest to accrue on thus saving you thousands of dollars in interest. The extra yearly payment doesn't hurt either. You can also make a payment every 15 days or twice monthly thereby making in total your same monthly payment as if you paid once monthly and still save thousands and reduce your mortgage term by several years.

Answer 3

any payment above the required amt will save you money(interest). The quicker you lower the outstanding balance the more money you save. Paying half every 2 weeks is just an easy example because it equates to 13 monthly payments instead of 12. Paying half twice a month is still only 12 monthly payments.

Answer 4

You pay every two weeks so that they have that extra payment each year. You make 26 payments instead of the 24 like you would if you paid twice a month.

Answer 5

i might communicate on your lender and be certain that they are in a position to attend to this. in the event that they are asserting they gained't do it, or will cost a cost then you rather can nevertheless do it that way. Open a discount expenditures or loose checking account and positioned the money into there the 2nd a million/2 of the month, then on the 1st a million/2, take the different a million/2 of the fee and combine it with the low value expenditures account. in case you get a funds industry account, you are able to could save a definite volume in there (that is good for emergencies) and characteristic a limited form of transactions available, yet whilst all you're genuinely utilising it for is your loan fee, then you rather could be advantageous. good luck!