Become Debt-Free Sooner With Biweekly Refinance Programs?

You may wonder how you can get rid of those mortgage payments and finally own your property fully without owing anything to any lender with your home guaranteeing that loan. A good solution to that situation is to obtain a biweekly refinance program that can accelerate repayment of your home loan significantly and aid you in becoming debt-free sooner.

Bi-weekly repayment programs consist on payments every other week which implies 26 payments every year instead of 12. Of course, each of these payments has a lower amount than those of monthly payments but even if it is half the amount, you still would have an additional month of repayment thus accelerating your repayment a month every year.

Biweekly Repayment Programs

These repayment programs work seamlessly for those who want to repay their mortgages sooner. Each year of loan repayment is divided into 26 biweekly payments instead of 12 monthly payments. A Year has 52 weeks and payments are made every other week which results on 26 payments each year.

The amount of the monthly payments is defined according to your budget and needs. Some choose to destine higher amounts than the equivalent to half a monthly payment on a traditional repayment program. But even if you just leave them at half the amount of monthly payments, 26 biweekly payments are equivalent to 13 monthly payments. Thus, each year you will be repaying an additional month. This means that after 12 years of repayment you will have gained an additional year.

Save Money In The Meantime

Another benefit of this kind of repayment programs is that by choosing a biweekly repayment program you are continually reducing the capital on a higher rate than with monthly payments. The second payment each month will be calculated with a lower principal and since interests are calculated over the principal you will be saving money.

It may not sound significant on a monthly basis but over the whole life of the loan, it represents savings of thousands of dollars just by spreading the repayment of the loan on 26 biweekly payments instead of 12 monthly payments. As you can see, though it may seem more complicated, it is well worth the trouble.

The Interest Computing Issue

There is however an issue that may arise when interest calculations are made. You need to make sure that interests are calculated also on a biweekly basis because some lenders though offer biweekly payments, still calculate interests on a monthly basis which annuls the benefits you can obtain from a reduction of the amount of interest repayment through sooner principal cancellations.

Thus, when selecting the loan and lender, you need to be very careful and read the contract thoroughly. Make sure that the lender states that interests are computed biweekly too and preferably, you should require a written statement. When requesting loan quotes from different lenders, don’t forget to require information regarding the different repayment programs and the calculation of interests on each one of them so you can rest assured that you won’t close on a deal that is not to your advantage.