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We all know how hard the beginning of the month can be; it seems like there are a million bills due all at the same time, and one of those bills is usually the most expensive among them all—your mortgage. After you budget for all of your expenses, that gigantic payment can really make a big impact on your bank account. That's just one reason why some homeowners choose to pay their mortgage in halves twice a month, rather than monthly as a whole.
Paying Your Mortgage Differently Than Traditional Monthly Payments
You might be able to choose to pay your mortgage bi-weekly or semi-monthly. Generally speaking, these are the same thing. However, a few days' difference here and there actually means that you would make 26 payments throughout the year if you paid bi-weekly, which is the same as 13 months' worth of payments. Semi-monthly payments would be paid twice a month, which comes out to 12 months' payments at the end of the year. Both are beneficial for several reasons, but obviously, you'll be paying a whole extra month if you pay bi-weekly, which can really cause the savings to add up over the life of a loan.
The difference comes in the timing in which your payments would be due. If you're paid on the 15th and last day of the month, bi-weekly payments can be tricky because there will be two times a year in which your payment will be due before your paycheck arrives. However, you can still opt for semi-monthly payments that get paid in accordance with your pay schedule.
The Benefits of Paying Your Mortgage Twice a Month
Let's start with the obvious benefit: you'll spread one amount of money across two payments. That means you'll have more money leftover during the initial payment date than usual and you can put that extra cash toward principle or put it in a savings account until the next payment's due so it can collect a little interest. Not only that, but because there's less time between payments, there will be less interest since interest is calculated at a daily rate. Since each payment will push a little more money toward principle, you'll actually end up paying your mortgage off faster than you would if you paid monthly in most cases. Be sure to check your loan documents to verify that you don't have a pre-payment penalty before you put this plan into place!
Before you commit to (or keep going with) monthly payments on your mortgage, stop and think about the benefits you could gain from splitting your payments in half. This is a great way to spread out the cost of one of your biggest expenses while simultaneously ensuring you're chipping away at your principle.
About the Author
Pablo Torres
Pablo Torres is a qualified Real Estate Agent with over 10 years experience in real estate sales, due diligence and contract negotiations. Knowledgeable of South Florida neighborhoods. Currently, Pablo focuses his skills on all markets in the Miami metropolitan area.
He has the ability to understand sellers, buyers and renters needs with excellent communication. Fluent in English and Spanish with working knowledge of Portuguese. Pablo has impeccable reputation and a passion for real estate.
He graduated with a degree in International Business from Florida International University (1998) and a masters in business administration from Nova Southeastern University (2003). He had embarked on a career in commercial banking before being driven to switch to one of his passions-real estate.
Dedication, perseverance and punctuality allowed Pablo to sell different types of properties. His expertise with South Florida's cultural diversity has allowed him to sell real estate to both buyers and sellers.
Part of what makes Pablo so successful is his dedication to exceptional customer service and his devotion to their needs, whether they are buying or selling properties. Pablo has many repeat customers who cite his willingness to work long hours to resolve the toughest issues, as a reason why they stick with him. Torres integrity, attention to detail and careful handling of a transaction, exceeds their expectations. Sellers know that Pablo's extensive and personalized marketing strategies, means that their listing is seen by most buyers.
As a real estate professional, Pablo has the tools to represent your interests in virtually any transaction. Pablo's ability to interview, reason and figure out the smallest details makes every successful transaction a seamless process. Pablo is the right real estate professional to hire.
