Why select a biweekly mortgage?
You’ve probably already heard the claim that a biweekly mortgage can save you thousands of dollars, and that a biweekly mortgage can shave years off the life of your loan and help you accrue equity in your home fast.
Well, it’s true! “Biweekly mortgage payments” is an accelerated mortgage payoff system that allows you to “painlessly” make an extra monthly payment during each year of your loan, thereby “accelerating” the payoff and saving you both time and money.
For Example: If you borrow $100,000.00 on a 30 year mortgage at an interest rate of 6% your monthly payment would be $605.19 and your total payments for this loan would amount to $217,868.40 over those 30 years. Pay this same loan at the same interest rate biweekly at a payment of $302.60, and the loan will payoff in a little over 24 years and the total of the payments would only be $191,437.84. The loan pays off over 5 years sooner and you save $26,430.56 in payment expense.
The way it works is rather simple.
Instead of making one single monthly mortgage payment each month, or 12 mortgage payments a year, you make a payment roughly equal to half a monthly payment every two weeks. And because there are 52 weeks in a year, that equates to 26 half mortgage payments a year, or 13 total monthly mortgage payments.
The basic result is an additional mortgage payment each year, but of course it’s not that simple. You also save some interest expense during the life of the loan because each consecutive biweekly payment is based on a little less of a principal balance than it would otherwise if you were paying monthly payments. This is why you can’t simply expect the same result by paying your mortgage monthly and paying one extra payment during the year.
Biweekly payments are only offered on In-House mortgage loans and require an automatic transfer payment from a deposit account held at The Northumberland National Bank.