• Douglas Paterson

Should You Change Your Monthly Mortgage Payment?



Mortgage Payment Frequency - Does it really matter?

Should You Pay a Mortgage Bi-weekly or Monthly? Let's Take a closer Look


Most homeowners look at their regular mortgage payment as their largest monthly expense, and something they must continue to do in order to maintain a good credit rating. However, you may have heard of bi-weekly mortgage payments (or even weekly payments) and their ability to reduce your debt load and help you pay off your mortgage significantly faster. If you are wondering if bi-weekly payments are too good to be true and if the hype is nothing but hype, here are a few things worth consideration.


Does Bi-Weekly Payment Actually Make A Difference?


Making a bi-weekly mortgage payment may seem to suggest your interest payments will be automatically reduced, but because the lender is not necessarily receiving that payment until the end of the month, this is not necessarily the case. However, while monthly payments will equate to twelve mortgage payments per year, a bi-weekly payment means twenty-six half payments will be made each year, which equates to thirteen months of payments and yes, that means an additional month of payment. As a result, this reduces the amount of interest paid across the year (and life) of your mortgage.


Consider Increasing Your Monthly Payment Amount


With each payment, bi-weekly payments can shave a bit more off the principal and thereby lower overall interest, but that does not mean you have to switch to paying every two weeks. Instead of bi-weekly, consider dividing your monthly mortgage amount by twelve and adding that amount to your monthly payment. Essentially adding another month of payments into a twelve-month period. This will bump up your mortgage cost per month, but it will, at the same time, reduce the total amount you owe. For example, if your mortgage payment is $2400 per month, divide it by twelve to get $200, and add this to your payment, bumping it up to $2600 each month.


Be Aware Of the Finer Details Of Your Mortgage


If you decide to make bi-weekly payments, be aware that there may be fees associated with this offering that will nullify your money savings. Speak with your mortgage provider or mortgage broker first to insure you understand any risks of costs associated with changing your payment amount or frequency. As a homeowner, it is important to stay aware of changes on the market and new mortgage offerings that may benefit you. However, it is also important to ensure that whatever you choose, you are aware of the overall picture, so you are making positive financial steps toward your overall financial picture.


Making a bi-weekly payment on your mortgage may have the benefit of lowering your overall home cost, but you may be able to get the same or better benefit if you save up and make larger lump sum payments year (or six months) Or yes, from simply bumping up your monthly payment amount. If you are currently on the market for a mortgage and would like a mortgage professional in your corner, please consider contacting one of our mortgage professionals for a non-charge consultation.

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