For anyone that is just slightly ahead in today’s economy, that is a feat in itself, and many homeowners that have found themselves in a position where they have a bit of extra money at the end of the month have opted for bi-weekly mortgage payments. This is a great way to pay your mortgage off early as well as stay on top of your finances, and there are certain lenders that are encouraging this mode of payment, going as far as contacting their clients to inform them of the bi-weekly payment option.
If you are someone that is considering making the switch to bi-weekly mortgage payments, you are definitely making a responsible choice towards your financial future, but it is important to note that your lender’s payment plan may not exactly match with what you can afford, and there are certain fees attached to this kind of arrangement. By knowing just what type of arrangement you are looking at, you can make an informed decision on whether bi-weekly payments are right for you.
Bi-Weekly Payment Pluses
There are definitely advantages to making bi-weekly mortgage payments. You will make a total of 26 payments per calendar year, which equals an entire extra mortgage payment by years’ end. You will be able to take years off of your mortgage term by doubling up on payments, and you will also be able to save on your interest charges. Additionally, making two timely payments each month will positively affect your credit score. While these are all definite pluses, you must also consider a few potential negative aspects before signing on the dotted line.
Cons to Signing Up for a Biweekly Mortgage Payment
The main downside to bi-weekly mortgage payments are the fees involved. There are often extra fees attached due to the fact that your lender will miss out on a portion of the money they would have obtained if you had stayed with the original terms of your mortgage agreement. In order to make up for the loss, there are often enrollment fees and monthly plan fees that are attached, and you also want to make sure that there are no prepayment penalties involved. If there are prepayment penalty fees, you are better off sticking to your original mortgage agreement.
Weigh Out Your Options
If you are unsure on whether or not bi-weekly mortgage payments are the right choice for you, it is always a good idea to weigh out your options and take a good look at your finances. One of the problems in agreeing to a bi-weekly plan is that unfortunately, unexpected financial emergencies can pop up, and if you default on your mortgage payments, a variety of issues can ensue.
If you are currently a step ahead with your finances, you may consider taking the money that you were considering putting toward that second payment and tucking it away in an emergency fund. This way you will still have your financial cushion, and if later on down the line you decide you want to pay your mortgage off early, you can use these funds to do so.
You may also benefit by consulting with a financial advisor or your mortgage lender in order to learn more about the bi-weekly option before making a final decision. They will advise on any fees and penalties associated with making the switch to bi-weekly payments, and you will be able to make a realistic decision on whether this is the best choice for you at the present time.
Do What’s Right For You
Ultimately, the decision on whether or not bi-weekly payments are the right option is up to you. If you feel that it would be a positive step to assist you in reaching your financial goals and that you can realistically afford it, bi-weekly payments are a great way to pay your mortgage off early and build up your credit rating. By taking the time to weigh out your options and carefully go over your budget and finances, you will be able to make a decision that will work for you.