Here’s why I advise paying your mortgage on a bi-weekly basis.
If you’re like most people, you pay your mortgage every month. What would happen if you paid on a bi-weekly basis, though? By this, I mean paying half of your monthly total every two weeks. Since there are 52 weeks in a year, this would result in 26 half-payments rather than 24. Thus, it’s a relatively easy way to make a 13th mortgage payment each year. By making this extra payment, you can save thousands of dollars in interest and reduce your principal much faster.
“I’m a proponent of the bi-weekly approach or at least trying to make that 13th payment each year if you can.”
For example, let’s say you have a $250,000, 30-year fixed loan at a 4% interest rate. If you made bi-weekly payments, you’d save $30,000 in interest over the life of the loan and pay your mortgage off five years faster. Even if you were in the house for seven years, you’d still save thousands in interest and pay off about $10,000 more in principal, which gives you more equity when you sell.
Personally, I’m a proponent of the bi-weekly approach, or at least trying to make that 13th payment each year if you can.
Remember, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m here to help.