Question: I refinanced two years ago and received an offer to pay biweekly instead of monthly. Will this help to reduce my mortgage more so than with monthly payments? If so, how and where can I apply? (Bing: How low are interest rates right now?)
Answer: Making biweekly payments on your mortgage will absolutely cut your interest cost and shorten the term of your loan, to boot. Such an arrangement usually is set up as an automatic debit from an account you specify. The mortgage lender will sweep through that account every two weeks and collect exactly half of your required monthly payment.
How does it work?
While there are only 12 months per year, there are 26 two-week periods. This means you are essentially making 13 monthly payments per year. In today's market, this can save you a bundle, especially if you start counting from the first monthly payment, because it reduces the term of a 30-year loan to about 25 years.
How much are the savings?
On a $200,000 mortgage at 5%, you'll cut the total term by just about five years, while shaving off more than $34,000 in interest cost.
Biweekly payments can be valuable, but there's no magic to them. In fact, if you are responsible and dedicated, you can simply send in an extra monthly payment once per year and achieve nearly the same savings. The biweekly plan just makes it happen automatically.
Use a mortgage calculator to see how you can save money with biweekly mortgage (or other) prepayments. Or, if you have a specific pay-off date in mind, try our It’s My Term Prepayment Calculator.
Phillip King, Suffolk Realtor, Coldwell Banker Residential Brokerage, 5018 Express Dr. S Ronkonkoma, New York, http://www.philliprking.com, phillip.king@cbmoves.com, 516-241-6264, 631-588-9090, Real Estate Long Island, Long Island Real Estate, Homes For Sale Long Island, Long Island Homes, NY Real Estate License, Long Island Condos, Houses For Sale Long Island, Suffolk Real Estate, Long Island Home, Long Island House, Long Island NY Homes, Suffolk Houses For Sale, Condos For Sale Long Island, Suffolk County Condo, Long Island Houses, Houses For Sale, Brookhaven Township, Islip Township, Ronkonkoma, Village of, Holbrook, Lake Grove, Holtsville, Farmingville, Selden, Centereach, Sayville, Bohemia, Blue Point, Bayport, Oakdale, Patchogue, Medford, Bellport, Brookhaven, Mastic, Shirley, Manorville, Center Moriches, Moriches, East Moriches, Eastport, Miller Place, Mount Sinai, Shoreham, Wading River, Ridge, Rocky Point, Coram, Middle Island, Yaphank, Babylon, Bayshore, Smithtown, Nesconset, Hauppauge, Residential, Resale’s, New Construction, Builders, Investors, First-time Buyer, Vacation Homes, Short Sales, Listing Agent, Buyers Agent, How to http://www.philliprking.com
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