{"id":4015,"date":"2018-06-08T22:56:24","date_gmt":"2018-06-08T22:56:24","guid":{"rendered":"https:\/\/www.michaeladeery.com\/blog\/?p=4015"},"modified":"2018-06-08T23:29:26","modified_gmt":"2018-06-08T23:29:26","slug":"bi-weekly-mortgage-payments-will-payoff-a-30-year-mortgage-in-only-24-years","status":"publish","type":"post","link":"https:\/\/www.michaeladeery.com\/blog\/bi-weekly-mortgage-payments-will-payoff-a-30-year-mortgage-in-only-24-years\/","title":{"rendered":"Bi-Weekly Mortgage Payments Will Payoff a 30-Year Mortgage in Only 24 Years"},"content":{"rendered":"

The Bi-Weekly Mortgage Payment Plan<\/strong> is a convenient mortgage budgeting plan that can help you save thousands of dollars in interest and pay off your 30-Year Mortgage in only 24 Years. This also lowers the overall effective interest rate paid on the mortgage,<\/strong> so if your rate is around 5%, your effective payback interest rate will be around 4% when using the Bi-Weekly mortgage plan. The Bi-Weekly mortgage payment plan is easy to set up, as there are 3 different ways <\/strong>to make payments that will accomplish the same result.<\/p>\n

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Typical Mortgage = 12 Payments Per Year<\/strong><\/span><\/p>\n

The typical mortgage asks for one payment per month, which equals 12 payments per year. With a 30-year fixed rate mortgage, therefore, 360 payments are required to pay the loan in full.<\/p>\n

Each mortgage payment is split into two parts \u2014 a principal portion and an interest portion. The principal portion is applied to the amount that you owe the bank<\/strong>.<\/p>\n

This diminishes your remaining loan balance. The interest portion is your cost for borrowing from the bank.<\/p>\n

As your loan moves toward maturity, the balance between your mortgage payments\u2019 principal-and-interest shifts.\u00a0In the early years, a significant portion of your payment is comprised of interest and just a small part goes to paying down your balance.<\/strong><\/p>\n

It\u2019s not until later in your loan\u2019s life cycle does the principal portion of the payment start to grow.<\/p>\n

<\/p>\n

Bi-Weekly Mortgage Payments = 13 Payments Per Year<\/span><\/strong><\/div>\n

A bi-weekly mortgage payment program is meant to short-circuit your loan\u2019s amortization schedule. Check out th example above.<\/p>\n

Instead of taking 12 payments per year, the bi-weekly payment plan asks for one payment every two weeks, which adds up to 13 payments per year.<\/strong><\/p>\n

Except that you can\u2019t make 13 payments per year on your mortgage \u2014 that\u2019s not how a mortgage works.<\/p>\n

With a mortgage, you pay a certain amount of interest on an annual basis and that amount is covered in your first twelve payments.<\/p>\n

The 13th payment has to go somewhere, though, so it gets applied to your principal balance; the amount that you still owe to the bank.<\/p>\n

And, this is how a bi-weekly payment plan works. With each \u201c13th payment\u201d, your loan balance is reduced by the entire amount of the payment<\/strong>.\u00a0You reach your loan\u2019s payoff date sooner.<\/strong><\/p>\n

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At today\u2019s mortgage rates,\u00a0bi-weekly payments shorten your loan term by at least 6 years.\u00a0Here is an example above of a Bi-weekly payment plan on a $200k mortgage.<\/p>\n

In this example the homeowner will save over 6 years off their mortgage and a total of $68,284 in interest using this payment plan, compared to making regular payments over a 30 year term.<\/p>\n

This also lowers the over all effective interest rate paid on the mortgage. If the rate on your mortgage is 5%, your effective payback interest rate will be around 4% using the bi-weekly mortgage plan.<\/strong><\/p>\n<\/div>\n

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2 Other Ways to Make Bi-Weekly Payments<\/strong><\/span><\/p>\n

Bi-weekly payments plans work; there\u2019s no doubt about that. It\u2019s just basic math.\u00a0There are two other ways you can self-manage your bi-weekly payment plan<\/strong>, so you accomplish the same goal of paying off your mortgage faster.<\/p>\n

Here\u2019s how to self-manage<\/strong>:<\/span><\/p>\n

1.<\/strong><\/span>\u00a0Rather than sending payments to the bank every other week,\u00a0you can achieve the same result by making your regular mortgage payment once monthly<\/strong>, by adding 1\/12 of your regular mortgage payment to your check each month.<\/p>\n

For every $1,200 in your mortgage payment, in other words, add $100 to your monthly payment. By sending $1,300 to your lender monthly, you will \u201coverpay\u201d your mortgage by $1,200 annually, which is a 13th payment.<\/p>\n

2.\u00a0<\/span>The 3rd and final way<\/strong>\u00a0to accomplish the bi-weekly program, is to just send in one extra monthly payment a year. Some people do this after they get their tax refund.<\/p>\n

Or if you earn bonuses and commissions at work, just send the bank one extra payment a year, and you can save 6 years off your mortgage.<\/p>\n

<\/p>\n

Is it Better to Self-Manage Your Mortgage Payments?<\/strong><\/span><\/p>\n

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One reason to skip the bi-weekly mortgage program is that bi-weekly payments are a contract and once that contracts starts, as a homeowner, you\u2019re obligated to make those 13 payments per year no matter what.<\/p>\n

By contrast, with a self-managed payment plan, you never have that obligation. You can choose to skip a month during the holidays, for example, then double-up on payments later on, or not at all. It\u2019s all in your control \u2014 not the bank\u2019s.<\/p>\n

And, lastly, if you find your bank is charging for it’s bi-weekly mortgage payment program, I would probably say no to that, you can save that money by self managing your payments.<\/strong><\/p>\n

I hope you found these tips helpful. If you have any questions about how to set up a Bi-Weekly payment plan, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!<\/p>\n

P.S.<\/strong>\u00a0If you would like to be updated faster on any important industry news or new loan programs that come out, please join my\u00a0Facebook Page<\/strong><\/a>.<\/strong><\/p>\n

<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Bi-Weekly Mortgage Payment Plan is a convenient mortgage budgeting plan that can help you save thousands of dollars in interest and pay off your 30-Year Mortgage in only 24 Years. This also lowers the overall effective interest rate paid on the mortgage, so if your rate is around 5%, your effective payback interest rate […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[787],"tags":[788,790,789,791],"class_list":["post-4015","post","type-post","status-publish","format-standard","hentry","category-bi-weekly-mortgage-payments-will-payoff-a-30-year-mortgage-in-only-24-years","tag-bi-weekly-mortgage-payments-will-payoff-a-30-year-mortgage-in-only-24-years","tag-how-does-bi-weekly-mortgage-payments-work","tag-making-bi-weekly-mortgage-payments","tag-saving-money-with-bi-weekly-mortgage-payments"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4015","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/comments?post=4015"}],"version-history":[{"count":8,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4015\/revisions"}],"predecessor-version":[{"id":4023,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4015\/revisions\/4023"}],"wp:attachment":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/media?parent=4015"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/categories?post=4015"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/tags?post=4015"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}