It All Comes Down to the Calendar
There is not a uniform number of days (or weeks) in every month. If you pay your mortgage monthly, that accounts for 12 full payments per year. Due to the number of days being inconsistent each month, paying biweekly will account for 26 half payments, or 13 full payments, per year. Therefore, you are paying an extra month of mortgage each year while barely feeling the change; you are budgeting this money over the course of 12 months. Let us explain why this is greatly beneficial to you!
You will pay off your mortgage faster
Nobody loves paying a mortgage payment; the faster it is paid, the better. Since you are paying an extra full payment a year, you will pay off your mortgage faster. This may still seem like a lengthy payment to you, but this method can save you years off your mortgage payment.
You will pay less interest
As mentioned earlier, a mortgage payment consists of interest and a principal amount (original amount of loan). The interest paid is a consistent percentage of the principal amount left to pay. Therefore, paying an extra payment a year will allow you to pay off more of your principal amount. As the principal amount lessens, so does the amount of interest you pay. Likewise, this may seem like a small change, but this will save you a lot of money over the course of your loan!
www.WSJ.com
