You probably pay your mortgage once a month by sending a check to your lender or making a payment online. Your money is then applied to principal, interest and escrow. Perhaps you’ve recently heard about a biweekly mortgage program, and you’re wondering if this can save you money in the long run.
The simple answer is: yes, it does. At the most basic level, biweekly payments require you to make half your principal payment on your mortgage every two weeks, instead of monthly. That means that instead of making 12 payments a year, you’ll make 13. The thirteenth payment will go directly to the principal on your loan, helping you pay less interest over time, as well as pay off your loan and build up your equity faster.
Biweekly programs work, but you may not need to sign up for one to make it happen. In fact, you can self-manage your loan and make extra payments without signing up for anything – and you’ll probably see better results in the long run.
How does this work? Instead of sending payments to your lender every other week, you can reach the same goal by making your regular monthly payment and then adding 1/12 of your regular mortgage payment to your monthly amount. So, if you pay $1,000 every month for your mortgage payment, start paying $1,085 each month. That extra amount will be considered your thirteenth payment at the end of the year.
Why would we suggest self-managing versus signing up for a biweekly payment program? Two reasons: 1) limit your financial obligation; and 2) some plans are not what they say they are.
If you sign up for a payment program, you are committed to make 13 payments throughout the year. Whereas if you self-manage and you have a month where you can’t make the extra payment, you can either not make it or add the amount on to your next payment.
At BancorpSouth, we offer both self-managed services and a biweekly payment program. Both services are quick and easy to set up. To self-manage your account, you can utilize our Bill Pay service through Online Banking or you can schedule payments through our mortgage online account access service. To speak with someone about our biweekly mortgage payment program or the different mortgage products and services available to you, give us a call at (888) 797-7711 or click here.
Material is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author.