Many people think of a month as 4 weeks and half a month as two weeks, but that's not exactly true. With 52 weeks in a year, there are 26 bi-weekly periods. If you make 26 bi-weekly payments, that's the equivalent of 13 monthly payments. Therefore, you end up paying one extra payment per year. The one extra payment per year can add up big time and allow you to pay your mortgage off in less than the original 30 years.
2. Decrease the Outstanding Principal Loan Balance Faster.
That one extra payment per year also reduces the amount of principal you still owe on your Lake of the Ozarks home loan. Principal is the amount of the loan before interest. The faster you can pay down the principal part of your loan, the more you will save in interest. The interest amount is based on the amount of principal you still owe after each payment is applied each month, or in this case every other week.
3. Save Money By Paying Less Interest.
By decreasing the amount of principal faster, you also reduce the total amount of interest paid over the life of your mortgage. This can end up saving you thousands of dollars. You will need to make sure that your lender is applying the payments as they come in though, rather than waiting until the second half comes in. If not, the homeowner will not get the full benefit, as the principal is still accruing interest on the amount left before that payment is applied. You have to pay down the principal first in order to reduce the amount of interest paid.
4. Increase Your Home Equity Faster.
With each mortgage payment you make, you are decreasing the amount you owe on your home loan. The less you owe, the more you own, in the form of home equity. Depending on the type of loan you have and how much you spent upfront on a downpayment, you might be paying private mortgage insurance until you reach a certain amount of home equity. By making bi-weekly mortgage payments, you would be able to reach that home equity level and therefore, would be able to stop paying for that insurance.
If you're thinking about applying for a home loan at the Lake of the Ozarks, give me a call at 573-746-7211. I'm here to help you every step of the way and help you determine what home loan options are best for your unique situation. Your mortgage lender at the Lake of the Ozarks is here to help with all your financing needs!
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Sr. Residential Mortgage Lender
NMLS #: 493712
2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049