A biweekly mortgage is considered to be one of the most cost-effective mortgages by homeowners around the globe. If you think you can opt for a plan that gives you two chances to pay your mortgage every month, here are 8 facts to further guide you to make an informed decision.
Smaller payments
You pay your mortgages once in every two weeks in a biweekly mortgage. It is a very convenient option because you end up paying less once every two weeks than you would once every month. So, if you are under a $300,000 mortgage with a 5% interest rate, you would be paying somewhere around $800 instead of $1600. It seems to be a more feasible option for someone who does not want to get tied down in mortgages.
More flexible
Dividing a monthly premium into two halves provides you the flexibility and privilege of not stressing yourself out with the disposal of a big amount all at once. The relief of knowing that you have not one but two chances to pay your debt every month is relaxing enough.
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Engage in a disciplinary habit
Making biweekly payments help you to engage in healthy financial habits. It helps you manage your debts according to a weekly budgeting system. As you have to pay your premiums twice a month instead of once, you begin to design a weekly payment schedule and discipline yourself.
Pay off the mortgage faster
If you are paying an extra premium every year, it not only reduces your mortgage amount but also the rate of interest associated with it. In a year, which consists of 52 weeks, you make 26 payments, which means that you are not paying for simply 12 months. With biweekly payments, you end up paying for a 13-month period every year. This helps you clear off your mortgage faster.
Grow your equity
The value of the house is directly related to the mortgage balance against the property. The above-mentioned calculations represent how you are able to pay your mortgage sooner than otherwise every year. Therefore, the faster you pay off your mortgage, the more the equity in your house.
Schedule payments according to your pay
If you earn every week, biweekly mortgages are manageable because you are able to pay smaller amounts once every two weeks. Similarly, if you get a fixed salary every month, you have a better insight into how to pay off a biweekly mortgage.
Save money
Drawing an example from the previous calculation, if you are paying more in a smaller time period, you will save on interests. You will end up paying primary amount more than the high-interest rates, which will help you save instead of spend.
Consider your financial situation
With all the goodwill that is accompanying a biweekly mortgage, it may not always be the right choice. So, if you have a tighter budgeting pattern and sparing an amount twice a week is difficult for you, this plan may not be for you.
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