What is a Bi-weekly Mortgage Payment?
In case you're not familiar with it, a biweekly mortgage payment is arrived at by dividing your monthly payment in half and then making one-half of your mortgage payment every two weeks.
As a result, you will end up making a total of 13 monthly payments per year instead of 12. As the calculator will show you, this can ...
However, before you start a biweekly payment program, there is something you need to watch out for.
Beware of Excessively Greedy Mortgage Companies
Since making biweekly payments results in the prepayment of principal ahead of the mortgage terms, there are unscrupulous mortgage companies that take offense to you cutting into their future profit margins.
While some lenders will simply escrow your prepayment and apply payments as they were scheduled (thumbing their nose at your early payoff efforts), others will go so far as to assess a penalty for prepaying the principal.
So before you start making bi-weekly payments, be sure to check with your mortgage company to make sure your principal prepayments will be applied as you make them, free of any prepayment penalties.
How to Double Your Bi-weekly Payment Savings
As you will discover when using the biweekly mortgage payment calculator, making 1/2 of your payment every two weeks can save thousands of dollars in interest costs and shave years off of the repayment term.
However, once you've paid your mortgage off ahead of schedule, if you simply spend the money you were paying on your mortgage, you could lose thousands of dollars in lost interest earnings.
So, since you were already accustomed to making mortgage payments, why not continue to make those payments -- but into an investment that will actually pay you interest instead of having to pay interest to others.
If you did that you might just double the bi-weekly payment savings by the time the mortgage was originally scheduled to be paid off.