Simple Interest Bi-Weekly Mortgage

What Is a Simple Interest Bi-Weekly Mortgage?

A simple interest bi-weekly mortgage is a mortgage payment plan in which the lender applies the borrower's payments promptly toward the leftover principal balance of the mortgage.

This contrasts from a traditional bi-weekly plan, in which the servicer of the mortgage holds the main payment received during a month until the second payment for that month is received. After the second regularly scheduled payment is received, then, at that point, the sum of the two payments is applied toward the leftover principal balance of the mortgage.

Simple Interest Bi-Weekly Mortgage versus Traditional Bi-Weekly Mortgage

A simple interest bi-weekly mortgage plan makes greater interest savings than a traditional or standard bi-weekly plan. With the last option, two payments must initially be received before any amount is applied toward the excess principal balance of the mortgage.

Under a simple interest bi-weekly plan, in any case, when the primary payment is promptly applied toward the principal balance, interest is not generally charged on that part of the principal balance as it would have been had the payment been held until the second payment in the month shows up.

Borrowers really must be careful when they are signing up for a bi-weekly payment plan; borrowers ought to figure out the terms of their loan. A few lenders offer a bi-regularly scheduled payment plan, which is really equivalent to a standard bi-weekly plan, in that it comes up short on long-term benefits of the bi-weekly simple interest option.

Some third-party intermediaries will likewise offer to set up a bi-weekly payment plan for a borrower's sake. These third-parties will regularly debit your account like clockwork, however they will hold the funds until they may one payment toward the month's end. They may likewise charge a fee for the service.

Illustration of a Simple Interest Bi-Weekly Mortgage

A simple interest bi-weekly mortgage payment plan can empower homeowners to pay off their mortgage more rapidly than under a regularly scheduled payment plan — or a traditional bi-weekly plan.

For instance, consider a $200,000 loan with a 4.5% interest rate. Under a standard regularly scheduled payment plan, the homeowner would pay $1,013.37 each month. At the point when the loan is paid off, in 30 years, the homeowner will have paid an extra $164,813.42 in interest payments.

Nonetheless, in the event that the homeowners had a simple interest bi-weekly mortgage payment plan, they would rather pay $506.69 like clockwork. The loan would be paid off following 26 years, rather than 30 years, and the homeowners would have paid a total of $135,773.67 in interest.

Utilizing a mortgage calculator is a decent resource to grasp these costs.

As such, the simple interest bi-weekly payment plan would save the homeowner more than $29,000, and it would assist them with paying off their mortgage four years sooner than with a standard month to month plan.

Features

• A simple interest bi-weekly mortgage payment plan can empower homeowners to pay off their mortgage more rapidly than under a regularly scheduled payment plan or a traditional bi-weekly plan.
• A simple interest bi-weekly mortgage contrasts from a traditional bi-weekly plan, in which the servicer of the mortgage holds the main payment received during a month until the second payment for that month is received.
• A simple interest bi-weekly mortgage is a mortgage payment plan in which the lender applies the borrower's payments promptly toward the leftover principal balance of the mortgage.