Home Mortgage refinancing is a great option for homeowners who have a mortgage that is a couple years old, have built up some equity, but find themselves struggling with a high interest debt. The entire home mortgage refinancing process is basically getting your mortgage company or another lender to pay off your existing loan, and qualify you for another one with a lower interest rate. Your...

What Exactly Are Bi-Weekly Mortgages?

Michael A. Domeck

The concept of bi-weekly mortgage programs has been in the home mortgage industry for several years. The mere concept is structured so that by making bi weekly payments, you save yourself interest on the repayment of the loan. This is done by efectively reducing the term of the loan and usually is set up on automatic payments, so it also saves you postage and it's convenient.

By paying biweekly (or every other week) you take advantage of the fact that some months have three payment periods in them and because you'll be paying 26 bi-weekly payments (or every other week for 52 weeks) you'll end up making an extra monthly payment each year. When you multiply that extra payment over the life of your mortgage term, you can see the savings in your total interest and in reducing the term of your mortgage loan.

Your mortgage lender will usually like the convenience of cutting down on their paperwork and it reduces the risk of your payments being late by setting up an automatic payment. In turn this helps them get a faster return of their mortgage funds being repaid. What you DO need to be careful of is whether there are fees involved for this service. Some plans charge a one time $200 - $500 fee to set up this feature and still others may require an additional monthly maintenance fee to service the biweekly payment structure. Still other plans say that they accept bi-weekly payments but actually they only post the entire payment to the loan once a month which is exactly what you had to begin with. These examples are not good savings plans for your repayment of your mortgage loan.

Why pay such fees? You can set up this same plan for yourself at no charge. Below are a couple of ideas you might want to try.

- Divide your monthly mortgage payment (principal and interest only) by twelve (12). Add that additional amount to your regular monthly payment each month. You've made an extra payment per year on your own without a fee.

- Divide your monthly mortgage payment (principal and interest only) in half. The months that you have three payroll periods, send in an additional half payment in addition to your regular monthly payment. With two of these three week payroll periods per year, you've made that extra payment per year on your own without a fee.

The main key to remember when using either of these methods is that you are making your regular scheduled monthly payments just as you are now. But, you are paying additional amounts after the scheduled payment has been met which will save you interest repayment over the life of the loan and will also reduce your term of the original loan.

Here's another tip is you are interested in just saving interest and shortening the term of your loan. Simply add an extra amount to each months payment and mark it as "priincipal only payment". On a $200,000 loan adding an extra $300.00 per month to your payment will result in shortening the length (term) of your loan by almost 10 years. This could also result in a savings of over $100,000 in interest!

About the author:

Learn what all the "mortgage hype" is all about. Find out the secrets to getting the best mortgage financing at the best rates and the lowest fees. Learn why re-financing may NOT be the best way to go and why! Visit: Free Advice on Mortgage Refianancing to learn more!

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