Biweekly Mortgage
A mortgage on which half the monthly payment is paid every two weeks. This results in 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. Because of the extra payment, the biweekly mortgage amortizes before term. For example, a 7% 30-year loan that is converted into a biweekly pays off in 286 months (23 years, 11 months). Benefit of a Biweekly: Borrowers do not need a biweekly to make extra payments. They can do it themselves in a variety of ways described below, but all require self-discipline. Having a third party set up the procedure and legally obligating borrowers to make the additional payments forces the discipline on them. New Biweeklies: Borrowers taking out a new loan who need the discipline provided by a biweekly can usually do better with a straight monthly payment loan carrying a shorter term. A 30-year loan converted into a biweekly carries the 30-year rate, whereas 15 and 20-year loans often carry lower rates. 15-year loans in particular generally carry rates 3/8% to 1/2% below those on 30s. Rolling Your Own Biweekly: Borrowers who already have a 30-year mortgage and are attracted by the prospect of paying it off early, have a number of options. One is to open a new account with a bank that has an automatic payment privilege and arrange for it to make their monthly mortgage payment every month. If they pay half the monthly payment into this account every two weeks, after a year the account will have enough money for a double payment. Increasing the Monthly Payment by 1/12: Another simple method is to divide the monthly payment by 12 and add that amount to the payment every month. Paying an extra 1/12 of the payment every month for 12 months is the equivalent of one full extra payment. This method pays off a loan a little sooner than a biweekly or a double payment at year-end because balance reductions begin with the first extra payment rather than after a year. A 30-year 7% loan will pay off in 285 months rather than 286. Simple Interest Biweeklies: On a simple interest biweekly, the biweekly payment is applied to principal every two weeks, which results in a faster payoff. Again, however, the difference is small. The simple interest version pays off the 7% 30-year loan in 284 months.
Popular Mortgage Terms
A particular combination of loan, borrower, property, and transaction characteristics that lenders use in setting prices and underwriting requirements. ...
An interest rate index that is used on some ARMs. ...
The date on which the closing occurs. On a purchase transaction, there is no financial advantage to the buyer/borrower in closing on any day of the month, as compared to any other day. ...
The amount the borrower is obliged to pay each period, including interest, principal, and mortgage insurance, under the terms of the mortgage contract. Paying less than the scheduled ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
Advice on where to go to get a mortgage. A borrower can always select a loan provider by throwing a dart at the Yellow Pages. A referral is of value if it raises the probability of a ...
The process of raising cash periodically through successive cash-out refinancings. This is a scam initiated by mortgage brokers that victimizes wholesale lenders, with the connivance of ...
Interest from the day of closing to the first day of the following month. To simplify the task of loan administration, the accounting for all home loans begins as if the loan was closed ...
The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a specific property. ...
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