Unveiling the Magic of Non-QM Mortgages Emerging from the shadows of the pandemic,…
So, you’ve just taken the plunge and secured a 30-year fixed-rate mortgage. But the thought of three long decades of monthly payments might be daunting. You might wonder if there’s a way to shorten that seemingly endless term and save substantial money. Well, you’re in luck because we’ve got a fantastic mortgage hack for you – the biweekly payment program. In this blog post, we’ll break down the biweekly payment program, how you can qualify for it, and provide a real-life example of how it can save you thousands of dollars and years off your mortgage.
What is the Biweekly Payment Program?
The biweekly payment program is a simple yet effective strategy to reduce your mortgage term and save money. Traditionally, when you have a 30-year mortgage, you make 12 monthly payments yearly. However, most Americans are paid biweekly, which means there are 26 biweekly periods in a year. With the biweekly program, instead of making 12 monthly payments, you make 26 biweekly payments – essentially, you’re making one extra monthly payment every year. This extra payment directly reduces your principal, significantly saving time.
Qualifying for the Biweekly Payment Program
Qualifying for the biweekly payment program is crucial, but not all lenders offer it. When selecting a mortgage professional to work with, make sure they have access to this program and that it’s available once your loan closes. The servicing department takes over after your loan closes, and you’ll need to create an account and start making payments. Ensure that the biweekly payment option is part of their services.
The Numbers: A Real-Life Example
Now, let’s crunch some numbers to see how much you can save with the biweekly payment program. Imagine you have a $600,000 mortgage with a 7% interest rate and a monthly principal and interest payment of $4,000. If you make the regular monthly payments for a year, you’ll have paid $48,000. However, with the biweekly program, you’ll make half of your monthly payment, which is $2,000, every two weeks. Over a year, this adds up to $52,000. That’s an extra $4,000 paid toward your principal yearly, which can make a substantial difference.
The biweekly program can save you approximately $200,000 in interest payments and reduce the life of your loan by six years in this scenario. These savings can vary depending on the terms of your loan, but this simple tweak can have a significant impact on your finances.
It’s essential to remember that the biweekly payment program doesn’t automatically kick in after you secure your mortgage. Some homeowners have experienced issues where their servicer didn’t offer the biweekly option, even if they made half payments regularly. This can affect your mortgage history and rates. So, ensuring your chosen mortgage professional follows through and enrolls you in the biweekly program post-close is crucial.
In conclusion, the biweekly payment program is a fantastic mortgage hack that can help you save thousands of dollars and years off your mortgage term. It’s an opportunity to align your payment schedule with your biweekly income and pay off your loan faster. However, not all lenders offer this program, so choose your mortgage professional wisely. By making a few minor adjustments, you can take control of your financial future and enjoy the benefits of early mortgage payoff. Stay updated for more mortgage myth-busting tips.
Until next time, happy homeownership!