Making biweekly mortgage payments may not be as good as it sounds.
Traditionally, mortgage payments are paid on a monthly basis. You submit your payment once a month, and the mortgage company applies this to principle, escrow, and your interest. In theory, this method will get you to pay less interest as the arrow of time marches onward. Of course, having something in “theory” rarely applies to the real world. It’s important to know the drawbacks and side-effects of paying off your mortgage early, and what effects it will have on your life.
If it seems a little silly that your mortgage company will penalize you for paying off your mortgage early—that’s because it is. Some companies will hold off your first biweekly payment and then make the whole payment once they receive the second payment. So, in essence, you’re still making one payment a month.
If this lender-sponsored plan seems like something you want to avoid, but still want to pay less interest, there is still hope. You can make extra payments at any time, and you can do so in a variety of ways. Consider adding a little more to your monthly mortgage payment.
You can also create your own biweekly payment plan! You can make one extra mortgage payment at some point during the year to achieve the same result. Anytime you have some extra cash—like from a tax return or bonus from work—you can apply these funds to your mortgage as well.
Just because you sign for a 30-year plan doesn’t mean you have to spend 30 years paying it off. And setting up plans with your mortgage company may not be necessary. With more help on how to pay off your mortgage, contact Andraya Coulter in Walnut Creek, serving California and Texas, for all of your home loan needs!