BI-WEEKLY MORTGAGE

Michael Holigan: If someone told you you could save thousands and thousands of dollars on your mortgage and pay it off seven years early, you'd probably say what's the catch? Well, the catch is instead of making full payments every month, you're going to make a half payment every two weeks. Dave Gap makes home loans. And over the years he's given homebuyers just about every kind of loan you can name and then some. But there's the one he's stuck on and it's called a bi-weekly loan.

Dave Gap: I have six bi-weekly mortgages. So, I'm a big believer in bi-weekly mortgages.

MH: With bi-weekly mortgages you take your normal mortgage payment and cut it in half. You pay one-half of your normal mortgage payment every other week. By the end of the year you've made 13 full payments and you are going to be amazed on how early you pay off your house by making one extra payment a year. On a $100,000 home at eight-percent interest you'd save approximately $48,000 over the life of your loan. You'd also knock seven years off your 30-year loan as well. Using the same home as an example, making bi-weekly payments would cost you about $50 more each month than making payments every 30 days. Not much of a sacrifice when you're talking about saving almost $50,000 and knocking seven years off your loan. But what if you don't plan on staying in your house forever?

DG: The average homeowner will stay seven to eight years and end up with double to triple the equity for that next house, whether it's a move-up house or maybe even, you know, a retirement home or something like that.

MH: If you already have a mortgage you can convert it to a bi-weekly mortgage. You need to contact your lender and tell them what you're going to do and make sure that they can handle the paperwork. It's always best, though, if you're getting a new mortgage just to do it right from the get-go.

DG: You want that applied the day that that lender receives that payment. You don't want them to hold onto that payment till the end of the month and basically just increase the amount of principle that's applied to the mortgage.

MH: For Dave, knowing he'll pay his house off ahead of time is a great incentive to making bi-weekly mortgage payments.

DG: In the end, when this house is done and paid for, I'm going to enjoy giving the bank back its mortgage note probably about six or seven years earlier than most people that would have the traditional 30 year fixed mortgage. So, I'm very excited about that.

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Purchase Video

Episode 67 1997 - 98 Season

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