Bi-weekly mortgage option
Tuesday, July 30th 2002, 12:00 am
By: News On 6
If you want to buy a home, mortgage rates are still good, less than 7% for many folks on a 30-year-loan. There is a way for you to save thousands by paying off that loan in less than 30 years. News on Six reporter Rick Wells explains how it works.
Michael McCall is going for the American dream, owning his own home. He's sitting with Debbie Russell of Associated Mortgage Corporation arranging the loan that will get him that house. When he's finished he'll have a 30 year fixed rate mortgage, paid off 12 payments a year, for well 30 years. That's the traditional way, but more and more lenders are offering something called a bi-weekly mortgage. You make 26 smaller payments, one every other week.
Debbie Russell with Associated Mortgage Corporation: "The extra two half payments go toward the principle, and you're gonna pay the loan off in about 17 and a half years." There are some definite advantages, there's that extra payment a year. The earlier payoff is nice too, and because they draft your bank account, it's automatic. No checks to write, nothing to think about.
There are some drawbacks. In many cases there is a hefty set up fee, not all companies are alike so check around. Each bi-weekly payment will probably have a small administrative charge. And in many cases you are locked into the bi-weekly arrangement so if your job or pay schedule changes that could be a headache.
Making an extra payment every year on your home mortgage is probably a smart thing to do, get it paid off earlier, but maybe the financially more prudent thing to do is put the extra money on your higher interest rate loans, that's probably your credit cards. The bi-weekly plan is more widely available now for those who need it. There is even a weekly mortgage payment plan.
Looking for more information, get on your favorite search engine, Google or Yahoo, search for bi-weekly mortgage. You'll find lots of information on how it works and help on whether itâ€™s good for you.