Want to know how to save 5 or more years on your mortgage? Follow this simple tip:
Instead of having a traditional mortgage payment consider a bi-weekly mortgage. A bi-weekly mortgage allows a borrower to split their monthly payments into two and is paid every two weeks instead of every month.
Pros:
1. It saves money:
Paying your mortgage every two weeks instead of monthly allows you to make one extra payment per year. This means that you pay down more of the principal and save money on interest.
2. Paying off your mortgage faster:
Since you are able to make an extra payment per year and pay down your principal faster, a borrower can take years off of their mortgage. For example: If a borrower makes bi-weekly payments on a $200,000 mortgage with a rate of 5% and a 30-year term they will pay down the mortgage in 25 years saving them 5 years on their mortgage and thousands of dollars on their interest payments.
3. Home equity:
Making bi-weekly payments allows you to build equity on your home faster since they are able to pay down the loan faster.
If you believe that a bi-weekly mortgage is right for you, check with your lender to see if they offer that option when applying for or re-structuring a loan.