Is a biweekly mortgage right for me?
A biweekly mortgage is a payment system setup through your lender or another third party company. Mortgage payments are made every two weeks instead of once per month. The end result is that you pay one extra payment per year saving you thousands of dollars in interest per year. Many of the third party companies will charge you a setup fee as well as a monthly maintenance fee to use a biweekly payment system. You can do the same thing yourself, but it requires a little discipline. So is a biweekly mortgage right for you?
If you have a loan for $200,000 on a 30 year fixed rate of 6.5% then you will pay out $255,085.82 in interest if you pay only the minimum payment. By setting up a biweekly payment plan you will pay out $194,430.48 a savings of $60,655.34. You will also pay off the loan almost 7 years early. This assumes that you don’t have to pay a setup fee and you are not paying a monthly service charge for setting up biweekly payments as I mentioned earlier.
It’s still true that you will save money and pay off your mortgage quicker even if you use a third party company to setup biweekly payments and pay a fee, but remember you can do this yourself. Just pay 1/12 of your payment extra each month or an extra payment at the end of the year and you’ll get basically the same result. So to answer the question I think paying off a mortgage quicker and savings thousands of dollars is for everyone!