Bi-weekly Mortgage
A bi-weekly mortgage represents one of a few payment schedules that offer alternatives to the typical monthly payment scheme. In a bi-weekly mortgage, you pay half your mortgage every two weeks. This compares to a similar plan called a bi-monthly mortgage, which involves paying a half-payment twice a month (See: Bi-monthly Mortgage).
Same thing, right? Not quite.
In a bi-monthly mortgage, you still end up making the same number of monthly payments. You make 24 payments, each worth half of a monthly payment. That equates to 12 full payments.
In a bi-weekly mortgage, you end up making 26 payments, each worth half of a monthly payment. That equates to 13 full payments, or the equivalent of an extra month's payment each year.
Why? Because months are not the same length ("Thirty days has September, April, June..." etc.). There are 12 months in a year, but 52 weeks, or 26 two-week periods (or 13 four-week periods).
Paying this extra month's worth each year shortens the life of the mortgage, and lowers overall interest expense. Most mortgages allow you to apply additional payments to the principle, lowering the total amount you owe incrementally.
The added benefit of the bi-weekly mortgage is that you can set it up unilaterally. You don't need a separate, previously negotiated program with your bank. As long as each calendar month contains a full payment (meaning two half payments), you'll be in compliance with the mortgage terms.
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Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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