Why Should You Select Weekly or Bi-Weekly Mortgage Payments Over Monthly Mortgage Payments?
If you buy a real estate by obtaining a mortgage loan from a bank or any other financial institution, one of the most important factors that you need to take into consideration is to determine the rate of recurrence of your mortgage payments.
The most usual choices are weekly mortgage payment (where mortgage payment is done once every week, for example, every Friday), bi-weekly mortgage payment (mortgage payments is made on every second Friday), semi-monthly mortgage payment (mortgage payments is made on the 1st and 15th of every month) and monthly mortgage payment (where mortgage payment is done on the first day of every month).
While you select monthly mortgage payment, you have to go on paying a single mortgage payment per month for a period of 20 or 25 years, till the time your mortgage loan has been entirely repaid. For instance, if you avail a mortgage loan amounting to 200,000 dollars at an interest rate of 6%, then you have to pay approximately 1280 dollars per month as monthly mortgage payment for a period of 25 years.
Semi-monthly mortgage payments are akin to monthly mortgage payments. Here you make two mortgage payments every month for a period of 25 years. According to the above-mentioned instance, your semi-monthly mortgage payments would amount to around 640 dollars for a period of 25 years.
If you are eager to repay your mortgage loan before 25 years by any means, you may wish to think about selecting bi-weekly mortgage payment rather than monthly mortgage payment. The majority of people who select bi-weekly mortgage payments normally have the payment concur with the time of their own payment. When you are paid on every second Friday, your bi-weekly mortgage payment may be arranged in such a way so that it gets debited from your bank account on every second Friday too. One clear advantage of this is that the money necessary for making the mortgage payments would be there in your bank account at all times.
One more advantage for this selection of mortgage payment recurrence is that this lets you repay your mortgage earlier instead of later. For instance, if you obtain a mortgage loan of 200,000 dollars with an interest rate of 6%, your bi-weekly mortgage payments would amount to around 640 dollars, however, you have to make these payments for only 21 years. So you essentially save around 4 years of mortgage payments or about 64,875 dollars.
Nevertheless, you should always keep in your mind that you have to make two additional mortgage payments per year. That is the reason why selecting a bi-weekly mortgage payment helps you save both time and money. On a particular month, when you receive 3 paychecks, you are truly able to make 3 mortgage payments. Therefore, as unluckily your every additional payment is not costless to use up, a portion of it is and the remaining portion would help you save a considerable amount of money over the long term.
Weekly mortgage payments function similarly as bi-weekly mortgage payments. Here your mortgage payments are equal to 50% of your bi-weekly mortgage payments. In addition, you have to make four additional payments every year and this leads to the similar type of savings in terms of money and time like the bi-weekly mortgage payment.
Just think about having an additional 64,875 dollars for spending or approximately 4 years of time when you do not need to make any mortgage payment. These are certainly big advantages for you.
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