Even if you're not a hot shot financial expert, you know that it's in your best interest to pay off your debts as fast as possible so you end up paying less money in interest. Mortgages are better for your long term financial health than hefty credit card fees or even lines of credit, but did you know that it's possible to get the jump on your mortgage by paying more than once a month? It's true. It's called a biweekly payment plan. This article should help you decide if such a thing is for you.
You might be wondering: what's the difference? If you pay half a mortgage payment every two weeks instead of a whole mortgage payment once a month, aren't you still paying off your loan. at the same rate? No, because not all months have four weeks in them. As a result, you're paying two extra half payments a year. That's like adding an extra month of payment. And this whole extra payment goes toward the loan's principal, not the interest, so next time interest is calculated there will be less of it.
One extra payment a year doesn't sound like much, but when you think about how many years it will be between you purchasing the property and having it paid off, there's quite a difference. Over the long run, you could save upwards of $40,000 in interest on your mortgage and have it paid off several years sooner than you expected. Such a major difference is definitely worth your attention, and banks have noticed this, as a result, obtaining one may be difficult.
In order to make sure the maximum amount of money stays in their pocket, your bank might simply refuse to give you a biweekly payment plan when you buy your home. Another scenario that has been known to happen is that banks charge such a huge fee to convert to biweekly payments that it's not worth it. Instead, you may want to arrange to make an extra payment once a year if your bank will allow that. The best advice we can offer is to speak with a trusty, well known mortgage broker business. For a Toronto mortgage broker, Morcan Direct is your best bet for the best advice.
Some things to be careful of with biweekly payment plans are the fact that you will need to be able to pay more every month, and this may throw off your budget or even cause you to default on the loan if you're not careful. You should also avoid third party lenders that promise to convert your mortgage into a biweekly one, because you're just adding a middleman who will want to skim off his own fees from your biweekly payments.