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Does It Improve Credit Report?

Does It Reduce the Interest?

How Does the Math Work?

What's the Downside?

Is Making Biweekly Mortgage Payments an Excellent Idea?

Suzanne is a content online marketer, author, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps establish content techniques.

If you are a homeowner with a conventional mortgage who makes regular monthly payments on your home, you may have found out about biweekly mortgage payments as an alternative to standard payment strategies. The reasoning is that increasing the frequency of the payments lowers the interest that develops and, throughout a 30- or 15-year mortgage, that can equal years of payments gotten rid of from your loan. However, biweekly mortgage payment programs generally carry extra charges and need concurring to a bigger payment amount.

Before you register for biweekly payments, it 'd be a good idea to weigh the advantages and disadvantages of this type of program to figure out whether it will actually conserve you any cash.

- Some biweekly payment programs offered by lending institutions are not the best monetary choice for the homeowner.

Committing to biweekly mortgage payments can be challenging on a tight budget.
Biweekly mortgage payments won't always improve your credit report.
Making extra payments towards the principal of your mortgage is a method to minimize your interest payments over the life of the loan. You don't require a formal contract to do this.
In any case, ensure your mortgage does not come with an early prepayment penalty. That will harm any strategy for paying off the loan early.

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Will Switching to Biweekly Payments Boost My Credit Rating?

Using a biweekly payment schedule established by your mortgage lending institution puts you on an automatic withdrawal plan that guarantees that your payments are made on time.

If you're the kind of person who misses payments from time to time because you forgot to compose the check, an automatic payment schedule will improve your credit due to the fact that your payments will be on time. However, you can get the very same benefit with an automated monthly payment.
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Will Biweekly Payments Reduce the Interest I Pay?

The idea that biweekly payments will decrease your interest payments might be a myth. Why? Because, depending on the details of your loan, there is a good chance that the getting your mortgage payment isn't the company that holds the loan.

Although you're paying two times each month, the servicer receiving your payment isn't making biweekly payments to the company that owns your loan. It's more likely that they're likely holding the payment in an account until the end of the month.

But will you still be minimizing the interest that is developing in time? Yes. Remember that each calendar year has 52 weeks. If each month has four weeks that equates to 48 weeks. So, biweekly payments don't consist of two payments monthly but rather amount to 26 half payments-the equivalent of 13 regular monthly payments in a year.

Some mortgage business do not accept biweekly payments on mortgages, so you must ask ahead of time before signing up for a biweekly payment strategy through a third-party lender.

How Does the Math Work on Biweekly Mortgage Payments?

It works like this: Biweekly payments are equal to 13 regular monthly payments in a year, while standard monthly payments are equal to 12 payments each year.

By paying an extra month every year, you're paying extra principal, which shaves 6 to 8 years off the life of the loan with time.

But do you have to make biweekly payments to do that? Instead, you could divide the total of one month's payment by 12 and add that quantity to your month-to-month mortgage payment.

If you're paying $1,500 each month, divide 1,500 by 12 and make your regular monthly payment $1,625. Talk with your mortgage company initially to ensure there isn't something more you need to do to ensure the money is applied to the principal quantity of your loan.

What's Wrong with Biweekly Mortgage Payments?

There are potentially 2 problems with opting for a lender's biweekly payment program:

- There are often charges attached to this payment strategy. That consumes into the amount you're saving by accelerating your payment schedule.
- You might, like most American consumers, currently have sufficient contractual payment obligations in your life. Unless you have considerable financial reserves, you might wish to keep some versatility in your budget plan rather than dedicating to biweekly payments.

Remember, you can always make an extra payment when you get 3 paychecks in a month, get a tax refund, or come into a windfall. You do not have to contractually obligate yourself to do it on a monthly basis.

Why Are Biweekly Mortgage Payments an Excellent Idea?

There are a number of advantages to biweekly mortgage payments. They include:

- Settling your mortgage much faster, and paying less interest over the life of the loan.
- Building equity in your house quicker.
What Are the Downsides of Biweekly Mortgage Payments?

Signing an official agreement to make biweekly mortgage payments has a couple of potential downsides:

- There are typically costs involved and they will consume into the quantity you're saving by increasing your annual mortgage payment.
- You're locking yourself into a dedication to pay a bigger quantity every year. If your budget takes a hit from another instructions, you might regret that.
What Are Other Ways I Can Pay Down My Mortgage Faster and Cheaper?

You can pay off your mortgage earlier and decrease your interest expenses without committing to a biweekly mortgage payment. For example, you can use a bonus offer or an unexpected windfall to settle a portion of your mortgage. If you get a tax refund, put the cash against your mortgage.

Whatever you do, ensure that you call your mortgage holder beforehand and make sure that your additional payment will be used versus the principal of your mortgage loan.

There are ways to pay for a mortgage without signing up for a plan that might include costs connected. The advantages might not exceed the gains of a biweekly mortgage.