There are lots of ways to save money on your monthly mortgage. Everything from shopping around for the best offer to improving your credit score or increasing your down payment. But after you’ve secured your loan, what can you do?
Enter the biweekly mortgage payment. It is a simple concept: instead of making a single payment per year, you evenly divide your monthly payment, and pay that amount every two weeks. Since there are 52 weeks in a year, that results in 26 half-payments, or 13 monthly payments. This means that you make one more payment than you would have if you just paid once per month. How does this save you money?
Take the average mortgage amount in the US, $317,035 (according to Mortgage Bankers Association), with a 3.9% 30 year fixed-rate mortgage rate. The monthly payment would be $1,495.35. Half of that is $747.68. If you paid $747.68 every two weeks, rather than paying $1,495.35 once per month, you would save $35,413.28 in interest and pay off the loan four years faster. Can you imagine? An extra $1,495.35 per year can save you over $35,000? That is a couple of fantastic vacations…or a year or two of college tuition if you’re more practical.
Interested in learning how you can save? Check out this lifetime cost of debt calculator.