There are so many different mortgage varieties and so many names that if you do not look into them with enough depth, you will find yourself at a loss, dizzy and making mistakes. Let us give you the clear differences between a Bi-weekly and an ordinary mortgage and the catches there might be.

Twice A Month

Yes, there are payments twice a month. Probably it is a little difficult to remember one payment more per month, but… what are agendas and reminders for? And when you find out the benefit it will give you, you will be waiting for that moment to come, twice a month.

The Technical Data

These loans operate in much the same way as an ordinary mortgage would, with the difference that you will be making one payment every two weeks. This carries an important benefit since, if you remember how many weeks there are in a year, you will discover the good news.

Ok, I will tell you: 52 weeks in a year. Making one payment every two weeks means 26 payments a year, right? And 26 bi-weekly payments a year mean 13 monthly payments instead of 12. You got it: One extra payment a year, without really feeling it.

The Down Side Of A Bi-Weekly

This option costs money in fees and interest lost due to the accelerated payment. Nevertheless, you should look out for these clauses in the small writing and look for a lender who will give you the prepayment option, thus, not losing interests by shortening the plan. A Little hint: Read the small writing…

A Great Convenience

The convenience of this type of repayment is that you are obliged by contract to have the discipline to pay twice a month and not just leave it to your fragile memory… However, you should calculate how much you can save on fees and interest, if any at all, for a loan with monthly payments, but for a number of years equal to that which you get with the bi-weekly loan.

Let Me Explain

It may sound a little muddled up, so I will explain: A 20 year bi-weekly loan will mean approximately 2 years less in an ordinary loan. You are making one extra payment per year, which means 20 extra payments during the plan. Now find out how much the payments will vary for an 18 year mortgage, or the nearest you can get to that number.

Now you can compare apples with apples. In addition to the bi-weekly conditions if they are really convenient, you can make another extra payment a year with your annual bonus. It is your choice, and you should enter that into your calculations.

One Little Catch

Make sure that every payment is applied to your balance as soon as it is received, or you will be saving exactly nothing, meaning that you will be losing the interest you could have saved thanks to the anticipated payment. Ask, read small writing, follow up. It is your responsibility.