What is a biweekly payment program? How does it work?
A. A bi-weekly payment program is a method of leveraging your payments to pay off your loan in a shorter period of time and save substantially on the total interest cost. By making half payments very two weeks, you wind up making an extra payment each year. In addition, you are reducing the principal more often, so the amount that the interest accumulates each month is slightly smaller. The total effect may be a savings of 15% to 20% of the interest charges over the life of the loan and shortening the term by several months. Here is an example of how a bi-weekly program can make a difference: Assume that you borrow $100,000 on a conventional 30 year Fixed Rate Mortgage at 6%. If your payments are set up on a monthly basis, they will be about $600. If you set the payments up on a bi-weekly basis, you will pay an additional $600 per year, the loan will pay out in about 24.5 years, and you will save about $24,450 in interest payments over the life of the loan. Top…
