Many people learn about programs where their bank offers biweekly instead of monthly payments for the mortgage or other loans. This option often sounds attractive because it saves the borrower money and pays off the loan sooner. To understand how to calculate the payments and how it works can be simple.
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Use an online biweekly calculator (see Resources) or do it yourself. The amount for biweekly payments is exactly half of your current monthly payment or what your monthly payment would be if you don't yet have a loan.
Pay every other week. You can do this on your own or set up a program with your bank. The reason this makes a difference is because there are 52 weeks in a year and only 12 months. Even though biweekly payments are cut in half, you are paying half the amount 26 times instead of the full amount 12 times. This amounts to an extra monthly payment every year.
Calculate your savings. Because you are paying more a year, you will pay off your loan sooner. If there was no interest involved, you would simply pay off your mortgage or any loan sooner by subtracting one month for every two extra biweekly payments every year. Compound interest, however, will add to the amount of savings because you will be paying more principal sooner, so there will be less interest. To do the calculations by hand is difficult, so use an online calculator (see Resources) to see how much you will save.