Article Summary:What are the advantages to a bi-weekly mortgage payment?
Do you know that every year you're giving away the hard-earned equity in your home by paying more than you have to in interest? Most home owners don't realize they can cut up to seven years off of the length of their mortgage, saving thousands of dollars in the process. Think it doesn't add up to a lot?
Think again. Let's lowball it and say you have an $80,000 mortgage and are paying an interest rate of 7 percent. How much will a bi-weekly payment method save you, versus paying the conventional mortgage off over 30 years?
Believe it or not, you would be saving over $25,000. The more your loan amount or the higher your interest, the more money this you can save. When you pay your mortgage bi-weekly, there are a number of factors that come into play.
You're reducing the term of your loan by up to eight years, you're paying less interest over the life of your loan and you're building up equity in your home sooner because more of your money is going towards principal than interest. The savings don't end there.
Due to the fact that your mortgage will be paid off years in advance, you will be able to discontinue your private mortgage insurance earlier than you would if you were paying over a full 30 years, thereby saving you even more money.
The bi-weekly mortgage method is also a wonderful option for people who want to pay off their homes in a shorter period of time than the conventional thirty year mortgages allow, but who don't qualify for a standard 15 year mortgage. It offers homeowners more convenience and flexibility than a fifteen year mortgage.
With a fifteen-year mortgage, if you want to change to a thirty-year mortgage, you would have to refinance. With the bi-weekly payment plan, if your circumstances temporarily change and you need to pay on a monthly basis for a period of time, there is no refinancing necessary.
So how much is someone going to charge you to save you thousands of dollars and build up quick equity in your home? There are various services available to homeowners that will take control of this process for you. But you can expect to pay anywhere from $99 to $395 set-up fee.
Some companies even claim to offer setting you up on a bi-weekly plan for free. Take warning to this...these companies always charge a transaction fee twice a month which average $3.50 each. This equals $84 per year or a whopping $1,848 over the term of the mortgage.
Not so free after all...
Using these companies wastes a lot of the money you would be saving by implementing such a plan in the first place. There is really no reason to enlist the help of a company to do this for you, when with the proper tools and information, you can do it yourself.
Unless you're independently wealthy and don't care where your money goes, then you will definitely want to look into paying off your mortgage on the bi-weekly plan, and learning how to do it on your own.
Craig Romero has served for 6 years as senior mortgage analyst for the leading financial reporting firm in the country. He's the author of "Homeowners Hidden Fortune" and "Bi-weekly Mortgages Explained" and has written hundreds of mortgage articles for major financial publications. Craig can help you discover how to quickly build a minimum of $40,000 worth of home equity and pay your mortgage off in 10 years or less without making biweekly mortgage payments. For more information visit www.wisemortgage info.com.