Are Biweekly Mortgages A Cheaper Way To Own Your House Faster?
Having a piece on earth that he can call its own is an every man’s dream. Unfortunately, most of people today are deeply in debts, paying off that piece of earth. Every chance the moment when you’ll hold the paper which proves your full ownership of the house will come sooner is a reason of excitement. One of the newer options which is promising you exactly that is by-weekly mortgage payment. Are their promises achievable? To commit to one payment program, first you need to understand.
What exactly is a bi-weekly mortgage?
The main purpose of a bi-weekly mortgage is to shorten the process of your loan payment. By committing to this payment program, you are paying 13 instead of 12 payments that you would be paying with a typical mortgage. According to this program you are making payments towards the principal and the interest every two weeks. Speaking in term of today’s mortgage rates, this should shorten your loan term by 4 years.
Should you use it?
There is no doubt that by-weekly mortgage program works, it’s simple as one, two, three. But deciding whether or not do you want to commit to them is far more complicated than that. Sometimes a simpler way of accomplishing the same effect is that you choose to self-manage your bi-weekly payments instead of letting the bank manage them. If you finally decide to take this step, you should be aware of the fact that you are signing a binding contract, meaning that you are under obligation to make those 13 payments a year no matter what.
Does it improve your credit?
This payment program assures that all of your payments are made on time, because it puts you on automatic withdrawal plan. This will improve your credit if you are prone to missing some payments from time to time, but you can reach the same goal with an automatic monthly payment also.
Does it reduce interest?
Unfortunately, this is just a myth. Based on the specifics of your loan, there is chance that the company receiving your payment isn’t the same that holds the loan. Though you’re paying twice a month, the servicer receiving your payment isn’t making biweekly payments to the company which is the owner of your loan. They’re forwarding it at the end of the month. Regardless, you can use biweekly mortgage calculator to determine yourself how much you can save in interest etc.
Though the advantages of by-weekly mortgage payments might seem tempting, usually they are not worth of the cost, the time and the commitment. One of the alternatives, as mentioned above is to manage your own mortgage by making your regular payment once monthly, and adding 1/12 of that amount to your check. Other option, which is preferable when the mortgage rates are low is refinancing into a completely new home loan.
At the end, it’s your home and accordingly the decision is only yours. We can only advise you not to fall into trap of cunning advertising, but to do your research and consult with experts.
About Author: Dan Radak is a VPS security and Hosting generaly specialist. Currently he is employed as a consultant in a couple of e-commerce companies. Lately he has been interested in financing related themes. You can follow him on Twitter.