Buying your first home is a major investment. As such, it is important to adequately prepare for it to help ensure that the process runs smoothly. As a first time home buyer, being educated about the process will stand you in good stead. This is especially true when it comes to securing financing to buy a home. Today, there are many mortgage options available to first time home buyers. However, since the structures of the mortgages vary from one provider to another, you should ensure that you choose the mortgage option that will be right for you. Bi-weekly mortgages are an option that first time home buyers should consider.
Bi-Weekly Mortgages
In most cases, mortgage payments will be made in monthly installments over several years. However, bi-weekly payments offer an alternative structure of making monthly payments, enabling you to make the payments every two weeks. As a result, each payment will be exactly half of the equivalent monthly installment of the loan.
How the Bi-Weekly Payments Work
The magic behind bi-weekly derives from the fact that a year is made up of 52 weeks. As such, bi-weekly payments will result in a total of 26 payments in a year. If you decided to make two payments every month, this would make a total of 24 payments in a year. With two additional payments under the bi-weekly payment arrangement, you will have made one extra month worth of payment. This extra payment will go directly towards paying your principal. The result will be a reduction of the interest you pay as well as shaving a few years off the initial payment period of your loan.
What You Should Know
While bi-weekly mortgage payments can be beneficial for first time home buyers, a bi-weekly payment schedule may not work best for all buyers. You should be sure to evaluate your choices and choose a mortgage payment plan that best fits your finances and budget. Also be sure to ask a trusted and experienced lender about the terms, conditions and pros and cons of the mortgage before getting ready to sign anything.
How Bi-Weekly Mortgages Can be Beneficial to You
Bi-weekly payments allow you to make an equivalent of 13 monthly payments in a year. This helps you to pay the mortgage in a shorter time as well as pay less interest on the life of the loan. This method is also more flexible and allows you to own the house faster, helping to build equity on the property.
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