Biweekly Mortgage Payments Can Save You Thousands

If you own your own home and pay a mortgage, you probably receive all sorts of offers from banks who want you to take out a home equity loan, refinance your current loan, or convert your mortgage into a biweekly mortgage.

The paperwork explaining the biweekly mortgage says that it can cut between five and seven years off your mortgage and save you thousands of dollars in interest. Sounds pretty good, huh?

It works quite simply. Instead of paying your mortgage monthly, you pay half your monthly bill biweekly. By paying the bill every other week, you end up making an extra payment each year.

For example, let’s say your monthly mortgage payment is $1,400.  If you make 12 monthly payments, you will have paid $16,800 at the end of the year.

If you pay biweekly, you’ll end up making 26 payments each year.  So if you pay $700 every other week, you will have paid $18,200 at the end of the year. The end result is that you made one extra payment, which reduces your loan balance and interest charges.

This is how you can cut years off of your mortgage. That extra $1,400 a year eats away at your balance and helps you pay it all off early.

Paying off your mortgage early is a sound financial move if you can do it. But is it necessary to sign up for one of these biweekly mortgages (sometime called Accelerated Payment Plans)?

Nope. Not at all. You see, there’s a catch. in order to sign up for the biweekly mortgage that your bank is offering, you have to pay a fee. It’s usually somewhere between $300-$500.  Some banks will also charge you a monthly processing fee.

But I can show you a better way to pay off your mortgage just as fast without having to pay any fee at all.

Just take the amount of your monthly mortgage payment and divide by twelve. Using the example above, $1,400 divided by 12 equals $116.67.  Now simply add this amount to your payment each month and make sure to make a note that you want it applied to principal.

By making 12 payments of $1,516.67, you will have paid off $18,200.04 at the end of the year. Just like that, you’ve gained all of the advantages of the biweekly mortgage without having to pay any fees or service charges.

Reverse Mortgages Pros and Cons

A few years ago my mom and dad were in a tough financial situation.  They were both retired and unable to work due to health concerns, and they were struggling to get by on Social Security and a small monthly pension.

They still owed a lot on their mortgage, plus credit cards, and their property taxes were too high too.  They thought they were going to lose the house they lived in for 22 years.

Then my brother in law read a story in the paper about reverse mortgages.  He brought the article over and we all thought that it could be the solution to their problems.  They went through with it and let me tell you it changed their lives forever.

In today’s economy where millions of senior citizens are in over their heads and living in houses they can’t afford, reverse mortgages can be a godsend.

Of course, a reverse mortgage is not something to take lightly.   Before you sign any paperwork, be sure you do your homework and understand the pros and cons of reverse mortgages.  Below I’ve listed some common reverse mortgage questions and answers, but you’ll definitely want to do more in depth research before going ahead with it. Read more