Pros and cons between bi-weekly vs. monthly mortgage payment?

Answer 1

besides writing extra checks per year...you might want to ask your loan officer about the bi-weekly program costs.

there are many lenders who charge you to setup a bi-weekly payment program. I would just take the regular mortgage payment...and pay an extra monthly payment per year....or pay extra every month.

whenever you send a 'principal only' check...make sure to mark this on the MEMO of the check...and DO NOT INCLUDE IT with the regular mortgage payment.

Answer 2

A bi-weekly mortgage gets paid every two weeks and a traditional mortgage gets paid monthly. With a bi-weekly mortgage you end up with smaller, more manageable payments; you also end up paying an "extra month" because you make 26 payments per year instad of 24. That builds equity faster and you can pay off a 30-year note in about 23 years. But it is more expensive overall per year (because you make 26 payments and not 24) (and since you pay for 24 years instead of 30 it is not more expensive in the long run)and, if you're paid bi-weekly instead of 1st and 15th, you don't get those 3-paycheck months, and sometimes that third paycheck really makes a difference. Well you still get the third paycheck, you just have another mortgage payment to take it away...

The advantage of the monthly payment is the overall expense is more manageable; you have one payment per month, every month, and don't end up with any three-payment months (just like the 3-paycheck months above). You also extend the amount of time you are getting a tax break for your mortgage payments.

Answer 3

Our mortgage company tried to get us to do this - for a small fee, of course. :) We politely declined. The answer I think would help you most is much simpler. What you need to do is apply the money directly to the principal. The mortgage company or bank amortizes the mortgage and puts the interest payment basically on top of the pile. Your first years of payments are primarily paying off interest on the loan. After all, the bank wants its dessert first! How you can help yourself most is by directly lowering the principal amount you owe. See if you can't make a small additional payment every month directly to your principal. Doesn't have to be huge; any amount will help, if you're patient and consistent. However, you have to stipulate that the amount is going *to principal*. If you just increase the payment without that stipulation, the bank will just apply it normally (i.e., interest first, then principal). In our case, we have a slip we fill out each month. I pay the amount due and add an additional $250 a month for additional principal payment (our slips have a slot for it). That's an additional $3000 a year -- BUT it's paying off the 'real' amount I owe, not just paying interest to the bank. And, as our 'required' payment goes down, we add that difference to the amount we pay to principal, thus paying it off that much faster. In five years, we've reduced our principal balance by $15,000 plus whatever percentage was applied to principal from our regular payments. That's a significant chunk. Mind you, some banks may not like this at all. I know our mortgage officer got a -very- pained smile when I asked him about it. However, unless there's a clause in your mortgage which specifically prohibits you from doing so, there's nothing they can do to stop you from doing this. If there is no option on your payment stub to allow you to add an additional payment to principal, call your bank and see how it can be done. You may need to insist and they may try to get you to pay bimonthly payments...but don't let them talk you out of it. The longer they make you pay *ordinary* payments, the longer you're paying *them* interest and making *them* more money. Good luck!

Answer 4

If you make payments biweekly for half of the amount you'd be paying monthly, you'll be making the equivalent of an extra payment per year - this would get your mortgate paid off quicker.

Answer 5

From just paying your morgage fortnightly instead of monthly you are paying the interest off more quickly.