There are many ways to pay off your mortgage faster, from earning extra income to renegotiating loan terms with your lender. Are biweekly payment options, often touted as a way to “pay off your mortgage in 4 years less,” in the same league as other payment methods?
Banks and other financial institutions typically offer a biweekly payment option to compete with lenders who may be offering lower interest rates. The selling point is that, under this schedule, you’ll pay off your mortgage sooner than if you stuck to a monthly schedule – even one with a lower interest rate. But is this option best for you? Or is it misleading?
Biweekly vs monthly mortgage payments:
The basic structure of a biweekly payment schedule is as follows: every two weeks, you pay half the amount of what your monthly payment would be had you opted for a monthly payment schedule. “The more often you pay, the faster you’ll pay off your mortgage,” is the concept being argued here, however upon closer scrutiny, this payment schedule is less helpful than you may think. Although any offer that purports speeding up your mortgage payment is enticing, in the case of a biweekly schedule, this offer is very misleading.
When broken down, a biweekly payment schedule begins to lose its appeal. There are 52 weeks in a year, so making payments on a biweekly schedule means that you’ll make 26 payments in the course of one year (one payment for every two weeks). As previously mentioned, the amount of your payment is half of what a monthly payment would be under a traditional schedule. If you think about it, however, 26 half-payments is essentially 13 full-payments – a much less exciting way to describe this payment schedule. If all that you’re really doing is making one extra payment a year, then what makes a biweekly schedule so special? What makes it a better deal than an offer with a traditional payment schedule, especially if that offer has a lower rate? Not much.
Instead of focusing on payment schedules and other gimmicks, focus on what truly differentiates one company from another: lower rates, better affordability, and quality customer service. If you can accommodate it, an extra mortgage payment each year can go a long way towards helping you pay off your mortgage, but it’s not necessary. Work with a lender you can trust and that you know will do its best to tailor your loan options to your needs. Here at Garden State Home Loans, we are committed to providing you with the best mortgage experience in the industry.