Bi-weekly mortgage payments, or making two half-payments of your loan twice a month, is an easy way to shorten the length of your loan and pay off your mortgage faster. Not sure if setting up bi-weekly loan payments is a good fit for your situation? Here are the pros and cons, presented by 92101 Urban Living in downtown San Diego.
Pro: Pay Off the Loan Faster
When you make two bi-weekly half payments instead of one full payment each month, you will end up making 13 full payments over the course of a year instead of 12. This extra mortgage payment is applied directly toward your principal to reduce your balance faster and shorten the length of your mortgage.
Pro: Easier to Budget
Many people find it’s easier to budget for smaller payments every two weeks rather than one large mortgage payment once a month. Your smaller payments will come out of two paychecks rather than one.
Pro: Build Equity Faster
The more you put toward principal, the faster you will build equity in your home. You can eventually borrow against this equity with a loan and get rid of private mortgage insurance (PMI) if you have it.
Con: There May Be a Fee
Unfortunately, many lenders charge a registration or setup fee to begin a bi-weekly payment schedule. There may also be additional charges to pay your mortgage bi-weekly rather than once a month.
Con: You May Have a Better Use for the Money
Bi-weekly mortgage payments mean making an extra mortgage payment every year. You may have a better way to use that money, such as paying off high-interest credit card debt. If you have debts with a higher interest rate than your mortgage, if may be wiser to put extra money toward that debt before the mortgage.
The mortgage process is often more complicated than first-time buyers realize. Working with an experienced real estate agent in downtown San Diego can help you feel confident in the investment you’re making. Take a look at our inventory of lofts, penthouses, and condos for sale in downtown San Diego online and reach out today to learn more! ')}