In general, the shelf life for most mortgages is 30 years. That’s 30 years of monthly payments toward the principal and interest components of a home loan.
In a much shorter time frame, however, you may be able to enjoy some financial perks by making one small adjustment: biweekly mortgage payments.
When you crunch the numbers, making biweekly payments (paying half of the monthly payment every other week) is the same as making 13 full payments per year. This could result in lower paid interest and an accelerated schedule for paying down the loan principal.
This strategy may allow homeowners to not have to wait 30 years to pay off their loan.
In addition, lowering the principal amount owed helps build up equity quicker. If you’re planning on using equity to make home upgrades in the future, this approach can help because it’s like boosting the amount you stash in a savings account.
Looking for another reason to switch to biweekly payments? Here’s one that can drop your regular payment by a significant amount: Most homebuyers pay for private mortgage insurance until their home equity reaches 20 percent. By increasing your payments, you may be able to reach this threshold quicker, and as a result, get rid of the additional monthly mortgage insurance payment.
If you decide to try this strategy, make sure you budget accordingly as it could change how you manage your money on a monthly basis. In addition, make sure that your lender allows such payments and that there will be no delays when payments are delivered on a biweekly basis. The same goes for any third party that is utilized to manage your biweekly payments.
The bottom line is that biweekly payments may help you maximize your real estate investment. If you have any questions about this strategy or any other home loan question, contact us today.
