Bi-Weekly Mortgage Program: Are They Even Worth It?

About the bi-weekly mortgage payment program, and whether it’s an effective way to own your home faster. Analysis, plus today’s live mortgage rates.

Source: Bi-Weekly Mortgage Program: Are They Even Worth It?

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Mike Nelson - AFNI am asked from time to time what I think about the bi-weekly mortgage payment program.  For some reason this question seems to be polarizing too.  People usually have a strong opinion one way or the other.  My answer is almost always the same – it depends.  It depends on your financial situation and  your financing options.

Mortgages are personal.  They must fit your needs!

The concept if the bi-weekly plan is certainly well founded.  In essence, the borrower will pay an additional payment over the course of a year and thus save on interest.  In some cases it can be staggering just how much interest is saved over the life of the loan.  I am always in favor of saving interest and accelerating principal payments when it comes to mortgages.

However, there are many scenarios in which a bi-weekly payment plan is not advantageous to the borrower.  For example,  ARM’S are effective interest saving loans for borrowers who are going to move in the first several years of owning their home.  In this particular example, an ARM is usually a better financial decision than a bi-weekly mortgage.

Mike Nelson - AFNYou Don’t Have to Sign A Contract to Achieve the Same Thing as a Bi-Weekly Payment Plan

Remember, you never get anything for free.  Trust me when I tell you this is true in the mortgage business.  If you decide a bi-weekly plan is right for your situation, you can achieve almost the same benefits without obligating yourself to two payments a month.

Divide your monthly payment by 12 and add that amount to your payment each month.  The overage you pay will go directly to principal and, in essence, will equal one extra payment over the course of the year.   You will be shocked at how much interest you will save over the life of a loan if you pay a little extra each month – especially in the early years of the loan.

Mike Nelson - AFNIn this scenario, you have achieved the same goal as a bi-weekly plan but you have not obligated yourself to the additional payment. Depending on the bi-weekly plan, some lenders may charge a higher rate or increased fees as well.  In the “pay a little extra each month” plan, you won’t pay for any added fees or higher rates.

The point is this, make sure your loan officer takes the time to know you and your personal situation.  Mortgages can be confusing and they are certainly complicated.  Do business with lenders that have a full suite of products that will fit your personal needs.  Please feel free to e-mail, text, or call if you want to continue the dialogue.

As always – Happy House Hunting.

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Michael Nelson AFN



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