I’ve checked, and my bank has a program for bi-weekly mortgage payments (2 times/mo). I’ve heard that this will help me pay my mortgage faster…too good to be true?
In: 2
I don’t see how it would help you pay your mortgage faster, assuming you’re still paying the same total amount per month.
One thing some people don’t realize is that mortgage interest is what’s called amortized, which means the bank adds up all the interest you will pay over the course of the mortgage, divides it by your total payments, and incorporates it into the payment itself.
If you were paying down a credit card, you would benefit from paying it down faster because interest would not build up as quickly, but that’s not the case with a mortgage.
If you owe the bank $2,000 per month, giving them $1,000 twice a month isn’t going to make any difference toward how quickly the mortgage is paid off.
I don’t see how it would help you pay your mortgage faster, assuming you’re still paying the same total amount per month.
One thing some people don’t realize is that mortgage interest is what’s called amortized, which means the bank adds up all the interest you will pay over the course of the mortgage, divides it by your total payments, and incorporates it into the payment itself.
If you were paying down a credit card, you would benefit from paying it down faster because interest would not build up as quickly, but that’s not the case with a mortgage.
If you owe the bank $2,000 per month, giving them $1,000 twice a month isn’t going to make any difference toward how quickly the mortgage is paid off.
In a “normal” mortgage, you pay once a month, which is 12 payments a year. In a bi-weekly program, you pay half the mortgage payment every two weeks, which is 13 monthly payments a year. (52 weeks is 26 biweeks, or 13 monthly payments).
You don’t need a “biweekly program” to do this yourself. If you want to get out of debt faster, when you send in your monthly payment send in an extra payment marked “for principal only” and you will do the same thing. Many lenders have such a process already set up. Back when we still had a mortgage the online payment screen had a separate section for extra principal.
You know those couple of months where it lines up that you get three paycheques in a month? This is the same for your mortgage, every now and then you’ll have three payments in a calendar month. Those extra payments are how you get ahead.
In a “normal” mortgage, you pay once a month, which is 12 payments a year. In a bi-weekly program, you pay half the mortgage payment every two weeks, which is 13 monthly payments a year. (52 weeks is 26 biweeks, or 13 monthly payments).
You don’t need a “biweekly program” to do this yourself. If you want to get out of debt faster, when you send in your monthly payment send in an extra payment marked “for principal only” and you will do the same thing. Many lenders have such a process already set up. Back when we still had a mortgage the online payment screen had a separate section for extra principal.
You know those couple of months where it lines up that you get three paycheques in a month? This is the same for your mortgage, every now and then you’ll have three payments in a calendar month. Those extra payments are how you get ahead.
Latest Answers