There has been much debate recently to the advantages and disadvantages of paying a bi-monthly mortgage.
Most Americans pay their mortgage once per month whether they have a traditional mortgage or maybe a veteran mortgage. There are many reasons for this:
- Traditionally, mortgages are paid monthly, and
- Paying a monthly mortgage works well for most people’s pay schedule.
There are several things to note if you are considering moving your mortgage payments to a bi-monthly plan. A bi-monthly plan simply means that instead of paying your mortgage at the beginning of every month, you will pay half of your mortgage every two weeks.
You will end up paying more if your move to a bi-monthly payment plan. The calendar is such that paying every two weeks will require 26 half payments per year. This is in contrast to paying 12 full payments each year (or 24 half payments). Thus, you end up paying an additional full payment at the year’s end.
If you are considering this change to your mortgage payment, it is vital that you carefully consider your financial portfolio. Can you really afford to pay additional mortgage payments?
In order to truly pay your mortgage correctly on a bi-weekly plan, you must contact your mortgage lender to make sure that they will apply the extra payments correctly. The additional payments you make need to be allocated to the principal of your loan. It is important to verbalize this to the mortgage company, rather than just start making extra payments.
Changing the payment plan of your mortgage can be tricky. Make sure that you can afford the extra payments. Also, double check with your lender to make sure that they know how to correctly apply each payment. Remember that bi-monthly payment plans require 2 extra half-payments or 1 extra full payment every year.