Should I Make an FHA Mortgage Payment Twice Each Month?
Is a Bi-Weekly Mortgage Payment a Good Idea?
One type of home loan payment strategy is the bi-weekly payment plan. With this plan, you pay the same amount each month, but you split that payment in half.
You don’t pay any extra (monthly) under this plan, but splitting your mortgage payment in half each month means you make 26 payments a year--an extra mortgage payment is made when you pay bi-weekly.
Why? Because the calendar year is not divided into 12 equally long months. Some months are longer than others, and some are shorter.
When you pay half your mortgage payment every two weeks, you wind up making one extra payment per year, and over a 30-year mortgage those additional payments add up to a faster mortgage payoff.
How Much Faster Do You Pay Off Your Mortgage With Bi-Weekly Payments?
It depends on the term of your loan and how soon after your mortgage begins you choose to adopt the bi-weekly payment strategy. The Consumer Financial Protection Bureau (CFPB) notes, “By making additional payments and applying your payments to the principal, you may be able to pay off your loan early.”
But you will need to check the terms of your loan to ensure you aren’t being charged a penalty for early payoff if you have a conventional loan. You should also ask the lender if there are fees for using a bi-weekly plan.
FHA Mortgages Have No Early Payoff Penalty
CFPB reminds borrowers, “Before choosing a bi-weekly payment, be sure to review your loan terms to see if you will be subject to a prepayment penalty if you do so.” The good news for FHA borrowers?
Lenders cannot charge you a fee for an early payoff of the loan. However, there may be special procedures your lender requires for the final payoff. Be sure to ask the lender whether you need to do anything special to make the final payment on an FHA home loan you’re paying off early.
Ask a participating lender about the biweekly payment plan option if you haven’t committed to a bank. You’ll be glad you did.
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