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Bi-weekly Mortgage

Posted on: 01st Apr, 2004 02:38 am
Bi-weekly Mortgage is a type of fixed rate mortgage in which schedule payments are made every two weeks instead of standard monthly payment. Each bi-weekly payment is equals to one-half of the monthly payment. It results in substantial savings in interest for the borrower since the mortgage is paid off sooner.

Benefits:
  • Bi-weekly mortgages increase the number of payments, that is, instead of making 12 payments a borrower has to make 26 payments in a year. This helps to reduce the interest amount paid on a bi-weekly basis. So a borrower pays lower interest compared to that paid throughout the loan term.

  • Bi-weekly mortgages help in the repayment of the loan within a short term. This enables to build up home equity at a faster rate.

  • The bi-weekly payments can be drafted automatically from the bank account of the borrower.
For example, A loan amount of $25000 is taken for 5 years at 7% interest rate. Each interest payment made on a bi-weekly basis is $247.51 and the total interest is $4215.79. Using this payment plan, the loan gets repaid 5 months before the usual loan term. But if the same loan is repaid by making monthly payments, each interest payment amounts to $495.03. The total interest in this case is $4701.80. This helps the borrower to save $486.01. So a borrower gains because of reduction in interest payments and the loan term.

Related Article:
if my balance is 100000 at a rate of 4.875 over thirty years how long will it take if i make bi weekly payments to pay it off. what if i pay weekly
Posted on: 25th Jan, 2010 07:13 am
You can use the given calculator to calculate the time period you would require to pay off the loan if you go for bi-weekly payments:
http://www.mortgagefit.com/calculators/biweekly-monthly.html
Posted on: 26th Jan, 2010 01:55 am
God one Niics......
Posted on: 26th Jan, 2010 03:25 am
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