Switching to a bi-weekly payment schedule

Switching to a bi-weekly payment schedule is a great strategy to accelerate your mortgage payoff. Here’s a more detailed explanation of how it works:

1. Confirm with your lender: Check with your mortgage lender to ensure they allow bi-weekly payments and understand their specific process for implementing this payment schedule.
2. Calculate the bi-weekly payment amount: Divide your monthly mortgage payment by two to determine the bi-weekly payment amount. Make sure to include escrow amounts if your monthly payment covers property taxes and insurance.
3. Set up automatic payments: Arrange for automatic payments from your bank account to coincide with your pay schedule. This ensures that the payments are made consistently and on time.
4. Make 26 half-payments in a year: With a bi-weekly payment schedule, you’ll make 26 half-payments in a year, which is equivalent to 13 full monthly payments. This results in an extra full payment each year, applied directly to your principal.
5. Shorter loan term and interest savings: By consistently making the extra payment each year, you’ll pay off your mortgage faster and reduce the total interest paid over the life of the loan. This can potentially save you thousands of dollars in interest costs.
6. Verify the application of payments: Regularly review your mortgage statements to ensure that the extra payments are being correctly applied to the principal balance. Contact your lender if you notice any discrepancies.

It’s important to note that some lenders may charge a fee or require enrollment in a specific program to set up bi-weekly payments. Be sure to clarify any associated costs or requirements before proceeding.

Switching to a bi-weekly payment schedule is an effective way to make an extra payment towards your principal each year without straining your budget. It allows you to save on interest costs, reduce your loan term, and potentially achieve mortgage-free status sooner.

Remember, while bi-weekly payments can be beneficial, it’s essential to consider your overall financial situation and ensure that you’re still able to meet other financial goals and obligations.