A biweekly mortgage is a second payback plan on which you pay half of your monthly mortgage payment once every two weeks as opposed to paying a full payment monthly. This system causes 26 half-payments to be given each year or that is 13 whole payments out of 12 payments. This additional annual payment may become a considerable amount of money you can save on the overall interest amount that you will pay in the course of repaying your mortgage and help you to repay the loan at an earlier date.
The concept of biweekly mortgage appeals to many home owners as biweekly payments can easily correlate with their biweekly wages. But it is necessary to also know how this system of payment works before deciding to sign up to it. In some lenders the biweekly plan may not be an automatic lending option and depending on the lending organisation, a set up may be required or even an administrative fee. A mortgage broker may aid in finding the right path between such options and working with a lender that can implement such a schedule effectively.
Evaluating Your Monthly Budget and Income Timing
In order to plan effectively with a biweekly mortgage, you must estimate your current earnings rhythm and stability of your budget. By aligning mortgage to your pay periods, it would be easier to have a constant flow of cash without the chances of delaying or missing a payment since most individuals get their paychecks on a bi-weekly basis. But you shall have to see that your income is stable enough to maintain this higher payment cycle.
Do take the trouble to review all your regular expenses and make sure your budget can be flexible to suit the bi-weekly deductions. Although technically both will increase the number of payments in the same amount, the change in timing may affect the distribution of your funds during the month. It may be necessary that you adjust your payment strategy on other bills so that your mortgage will never be neglected.
Consulting a Mortgage Professional
By collaborating with a mortgage broker Mississauga or the one in your place of residence, you will be able to make sure that you are selecting the most effective payment schedule that suits your economic behavior. Brokers will be able to look at your loan terms, explain to you what you have available and even negotiate more favourable structures on your behalf. This type of assistance is quite beneficial when you are not confident whether a biweekly arrangement suits your finances.
It will also help you go through the setup process and ensure that your mortgage payments are applying accordingly so that you do not incur any unnecessary extraneous fees. Looking broadly with a biweekly mortgage can sound like a trivial modification, however, this is a decision that you should take with an experienced financial expert to get the maximum out of it in the long term.
Setting Up Payments With Your Lender or Bank
To make a transition to a biweekly mortgage, talking over with your lender or mortgage broker is necessary to learn whether your current loan could be paid biweekly. This structure is provided by some lenders themselves, and by others you will need to arrange it with your bank or a third party service. This information is important as in case of incorrect application of the payments, the possible advantages may be lost.
Find ways (possibly automate payments) to work very closely with your bank. Automation provides consistency, as well as it decreases the temptation to postpone or to miss a payment. Schedules–To schedule extra payments ahead of time to pay off your principal loans faster, make sure you confirm with your lender that the extra payments are applied toward your principal balance not a suspense account which may delay the rate you accumulate equity faster.
Adapting to the Extra Annual Payment
The most significant feature in biweekly mortgage practice is that it will save one additional full payment per annum. Although this is an excellent strategy of paying a lower interest over a long period, you should be able to afford the extra expense. Even when divided into smaller sums throughout the year, additional payment will cost you more money that you will have to take into account in the budget.
Months with three pay days are going to be different and you must plan in advance. Rather than thinking of the surplus as spending money, think of spending it on any other financial objective or using it as a cushion to your mortgage. The point is to be disciplined whereby the fact that payoff will be resumed in the long run because the duration of loans and the amount of interest that has to be spent reduces.
