July 26th, 2011
In his blog post “Should You Pay Your Mortgage Bi-Weekly?” Justin McHood discusses bi-weekly mortgage programs, and whether it makes sense to enroll in one.
And, as McHood concludes, for many people it makes perfect sense – including him.
While conventional 30-year mortgages are extremely common, a lot of buyers are uncomfortable with having 30 years of debt. But they quite often feel stuck with the 30-year plan because they can’t afford the high payments of a 15-year plan.
What homeowners may not know is that they can shorten the life of their mortgage by six to eight years with a bi-weekly program. As McHood explains,
Once you are enrolled in the bi-weekly payment program, you will be making payments via EFT (Electronic Funds Transfer), which means that you will make 26 payments per year instead of 12 – and essentially, you are making 13 monthly payments rather than 12, with the extra payment going to principal.
Though such programs typically aren’t free – they have an upfront cost of $250 to $500 and then a fee of $5 to $10 for each payment – they can save you money on interest in the long run.
They are convenient because many people are paid bi-weekly, so their mortgage payments correspond with their paychecks.
They also eliminate the pressure of having to remember to make the payment, which for some people is well worth the extra cash.
Ask an Acadia Lending expert about a bi-weekly mortgage program today!