The mortgage world as we know it has a tradition of lending out loans that you pay once a month. It is based on a certain time period, or length of a loan. The thought of paying a mortgage payment twice a month seems to be overwhelming and just too much money for most home owners.
But its not! With a bi-monthly mortgage, you take what would be your single monthly payment and divide it in two. You then pay this payment every two weeks.
What happens is with every month having a few days over 28, you end up paying about 2 extra payments every year. Great, you're thinking, a whole whopping two payments a year. But this can make a huge difference in the long run!
What happens is that your extra payments go towards the principal. So not only do you pay your mortgage off more quickly, but you also build the equity in your home faster. This is great if you ever want to sell or refinance your home before the mortgage is completely paid off. And of course, the closer you are to owning the property free and clear and not owing any lenders more money or interest, the better you should feel. You can then fully enjoy the appreciation in the value of your property.
Some may say paying once is enough, and if you really wanted to, you could just pay some extra money here and there, when you have it, to decrease the principal and cut the amount of interest you pay and years off your mortgage.
However, if you feel you could use some help in the discipline area with paying off more of the principal every year, or feel that using your extra money towards paying of your mortgage is something you simply won't do, then you should consider a bi-weekly mortgage. It may be just what you need to pay off your mortgage in a shorter amount of time and save a lot of money in interest.
As in any mortgage, it is best to compare all different types and terms to find the situation that best fits your needs. You should consider adjustable rate mortgages, fixed rate mortgages, and balloon mortgages. All the terms can be negotiated, so talk to your brokers or lenders you are considering working with what it is they can do for you.
Always work with a lender or broker who is licensed and working in your best interest. They are there to help and answer questions, so don't be afraid to ask and know you can always go somewhere else if you don't like the terms you are getting!
With a bi-monthly mortgage, the rates can be adjustable or fixed. It is named for the payment structure and not the type of rate like the other two. So do some research and compare the terms of all possibilities. Choose the mortgage that will cost you the least amount of money. And one more tip: if you don't choose the bi-monthly payment plan, try to put some extra money towards your mortgage principal every month and reap the benefits of a shorter term and less interest!
About the Author:
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.
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