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Bi-weekly Mortgages  
Learn how to significantly reduce the term of your mortgage and the amount of interest you pay.


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FinancialWhen it comes to money, purchasing a home is the greatest single investment most people will ever make in their lives. Nothing quite matches the feeling of sitting down to sign the final papers at your closing and seeing the numbers one last time before they become reality. Thirty years, hundreds of thousands of dollars in the principal—and even more in the interest that will be paid across the life of the mortgage. The experience is enough to make your stomach a bit uneasy. But once the first payments are made, that mortgage becomes just another part of life and the benefits of building equity in your own home are tremendous.

A number of years ago, financial institutions began marketing a new concept over the monthly mortgage payment—the bi-weekly mortgage payment. According to Fannie Mae, the nation's source for financing housing, by dividing the monthly mortgage payment in half and making one-half of the payment every fourteen days, a loan that would normally take 30 years to pay off takes only 22 years to pay off. Not only will you pay the mortgage off 8 years ahead of time, you will also save 8 years' worth of interest payments.

FinancialThe secret to the savings is that by making payments every two weeks, there will be two months out of the year where you will be making three payments instead of two. Those two additional payments equal one extra monthly payment each year. When that additional amount is applied to the principal of your mortgage loan each year, you reduce the principal quickly to pay off the mortgage sooner and thereby save thousands of dollars in interest over the life of the mortgage.

When financial institutions created the bi-weekly mortgage option, the ability to convert an existing monthly mortgage usually involved paying a conversion fee and maybe even an additional monthly fee for the privilege. Today it is possible to choose a biweekly mortgage payment option when you initially assume your mortgage, in which case, you should be able to avoid any additional fees.

FinancialMany people find a biweekly mortgage convenient because it coincides with their biweekly paycheck, which makes money management in your household budget a bit easier. A quick online search for "biweekly mortgage calculator" will provide you with a number of financial calculator options so you can see just how much you will be able to save by simply adjusting your payment schedule to make just one extra monthly payment toward your mortgage principal each year.

Fannie Mae notes that a biweekly mortgage payment option may be right for you if:

  • You prefer convenient payments.
  • You want to build equity in your home quickly.
  • You want to reduce the amount of interest you are paying.
  • You would like to time your mortgage payments to coincide with your biweekly paychecks.
  • You are nearing retirement or simply want to own your home debt-free quicker.

Just imagine, with a little planning you will be able to significantly reduce the duration of your mortgage loan and all those interest payments can be directed toward your children's education or funding your retirement. All by making just one additional payment each year toward your principal!

As with all financial matters, consult with your financial advisor regarding any decisions impacting your mortgage and any associated income tax effects.

Fannie Mae—

Articles are provided for the general interest of our readers. Gerber Life Insurance is not responsible for any content and recommends that you consult the appropriate professional with any questions or concerns you may have concerning any financial or health related issues.

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