Why and How Does a Bi Weekly Mortgage Payment Save in Interest Paid
A bi weekly mortgage payment scheme simply put is a normal standard fixed rate mortgage loan except payments are made every two weeks instead of once month.
The concept of every two weeks as oppose to twice a month confuses a lot of people, despite the fact a lot of people earn wages and salaries based on every two weeks. What you must realize is the fact there are 26 two week periods in every year but only 24 twice a week periods, so strictly speaking when paid every two weeks you are actually paid on a 13 month calendar.
Now back to our bi weekly payment calculator. When mortgage payments are paid under this arrangement there is 14 day period of relief from compounded taxes as well as an additional month of payment every calendar year and the combined effect of the two is a massive savings in mortgage interest paid over the life of the loan.
It is not possible to simply decide on making bi weekly payments on your existing mortgage and your choice is very limited when it comes to lenders offering bi weekly products.
The solution is to use a simple rule of thumb that will closely approximate the same effect as bi weekly mortgage interest savings without doing a full blown out refinance.
Simply take your monthly payment, with the tax and insurance part if your payments are impounded and multiply it 13, the take resulting number divide it by 12 and then round it up to the nearest round number. Now add back the tax and insurance portion back to the number you obtained, started making those payments and cut almost 14 years from the back end of your mortgage.
What a great way to enjoy the savings realized from a bi weekly mortgage without a refinance.
There are companies that collect the payment from you on bi weekly bases and then make your mortgage payments to your lender.
In our opinion that is risky and expensive method. All you have to do is to take your monthly mortgage payment divide it by 12 and add the resulting number to your normal monthly payments.