The Bi-weekly Mortgage Distortion

Financing

There is a great false principal in the Real Estate world that a bi-weekly mortgage will shave an    incredible amount of time and   interest from your original mortgage; in most cases this is not true!

Unfortunately, we have come to find out that most lenders “hold” the 1st  of the two bi-weekly     payments of each month until they receive the 2nd payment, thereby practically erasing the entire benefit of the early payment to reduce principal and interest more quickly.

However, all is not lost.  Because you are paying 26½ payments, you are paying the equivalent of 13 months of full payments annually.  With one extra monthly payment per year, you will reduce your 30-year loan to about 26 years; a small but substantial benefit!

Next time a lender offers a bi-weekly mortgage, investigate exactly when the payment amount is “deposited” and “applied.”  We are told there are a few lenders that actually do apply the monies immediately, but those lenders are few and far between.

If you like the idea of paying a bi-weekly mortgage (employer pays you bi-weekly), then try to find a lender that gives you the FULL benefit of paying on a bi-weekly basis.