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So you just bought your home and are now part of the American Dream. In thirty years you will own that home assuming you stay in one place for that long. Ever wonder how some people pay off their mortgages much earlier than others? One answer is they are paying their mortgages payments bi-weekly from the very start of the loan. Because there are 52 weeks in the year and not 48 this means you will be effectively making 13 payments every year instead of 12.

Depending on many factors such as the loan type and interest rate you can cut up to 6 to 8 years off the mortgage term by utilizing this method. This is because you are paying ahead of schedule and cutting down the actual amount of interest you are paying. There are many advantages to this.

One advantage is that it can make for easier budgeting. Most people are not paid monthly and do not pay their bills all on the same day of the month. By paying your mortgage payment every two weeks you can budget your income and payments much more easily.

It is also a known fact that those who endeavor to pay off their mortgages early are able to retire earlier. Imagine paying off your mortgage in 22 years instead of 30. If you can do this well before your retirement years you can save that much more towards your retirement that much earlier in your final working years! It can make a huge difference in how early you can comfortably retire if you do not have to worry about making that mortgage payment.

Another advantage is that as you pay off your loan you are building equity. By paying an extra payment every year you are increasing the amount of equity you have much more quickly. You can also use this equity to obtain lines of credit when needed for major purchases such as home improvements. It gives you a lot more borrowing power when needed.

There are a few pitfalls to watch out for however. Some mortgage lenders charge fees for early payoff. They can also may charge a monthly fee to handle the bi-weekly payments as well as a one time charge to set up the payment schedule. These fees can add up and ruin whatever benefit you might have reaped. These fees are also not tax deductible unlike your mortgage interest. It is also a good idea to deal directly with your mortgage lender and handle this payment plan yourself instead of using a third party intermediary. This is because you are ultimately responsible for paying on time. If the third party does not pay on time for whatever reason you are at fault and not them. Third parties also tend to charge a lot of fees. Rule of thumb is to always inquire before committing.

The benefits of bi-weekly mortgage payments can vastly outweigh any disadvantages if set up properly. The main thing to remember is to take the long view and plan for your future. Paying off your mortgage early can make it much brighter in the long run.

Learn more about this author, Chris Nycum.
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