Easy bi-weekly mortgage payments can make life more affordable
Most banks offer a bi-weekly mortgage payment option as a way to help speed up your mortgage freedom. You can save money in the end by speeding up your payments and by making more payments. How does that work?
If you make bi-weekly mortgage payments, that’s just a little bit more frequently than twice a month. I would coincide with bi-weekly salary payments.
You need a mortgage calculator to figure out quickly how much longer it will be before you got your mortgage loan all paid off. If you enter bi-weekly mortgage payments into the calculator, you’ll see that it will end up taking out some payments, in the end. You’ll be mortgage-free sooner.
To see how it works, just start with the basics. You could have a preliminary look at this mortgage calculator (a basic one): http://www.realtor.ca/calculator.aspx?CultureId=1&Price=&tab=1. With that in hand, you can probably figure out roughly where you stand.
If you want to get fancy and produce your own amortization table, then the following mortgage calculator may be helpful: http://www.canadamortgage.com/calculators/amortization.cgi.
Carrying a mortgage into retirement may be a problem for some. With a reduced income, will you be able to comfortably make the payments?
Many people have signed up for mortgage loans that will extend well into their retirement years. Making mortgage payments during those years when income will be less might be something you’d rather avoid.
Is there something wrong with carrying a mortgage into retirement? Some say it’s too much of a burden, others say it’s at least better than continued renting. Although both are right, we shall assume that you’d prefer to pay off your mortgage sooner.
There are ways to achieve that with fairly little financial effort – and of course fully legally. Speeding up payments with bi-weekly mortgage payments is one way. With the mortgage calculator at your side, you can achieve that.
It’s no surprise that many people say that your retirement years should be mortgage-free. With debt levels higher than ever and savings rates at their lowest, more people are expected to be lugging a mortgage into retirement.
With bi-weekly mortgage payments, you’ll shave some off the end of your mortgage because you’re speeding up the payment schedule a little bit, every month.
BI-WEEKLY MORTGAGE PAYMENTS BEFORE RETIREMENT
The dry statistics also say that of more than three-quarters of Canadians aged 50 to 59 who own their homes, nearly half currently have mortgage debt. For the age-group 60 to 69, about 75% own their homes outright, meaning that a quarter of them are still carrying a mortgage. There are, of course, reasons why we carry debt into later life.
Over the years, an economic shift has occurred. Since mortgage sizes have risen much faster than incomes, people tend to stretch out their mortgage repayments (amortizations) over a much longer time.
When 20 years as a max was quite common some 30 years ago, we now see new mortgages in the 25-30 year ranges. There are still a lot of mortgages out there that were meant to be running for 35 years or sometimes even longer. You need no mortgage calculator to understand that payments will be smaller when you spread them over a longer period.
Also, in the days when people got a mortgage 20 years ago, personal savings rates were over 4 times greater than they are today. Saving was “fun” back then, when interest rates were high. Not many people, these days, enjoy saving their money to receive a 3/4% annual return on their money. That’s even less than the inflation rate.
Following this, people back then were also more inclined to make accelerated payments or prepayments. Still, making bi-weekly mortgage payments instead of monthly payments doesn’t hurt. It does make life easier!
Once you have a home and a mortgage, you can expect the property value to go up while the amount of the mortgage gradually gets paid down – each time you make your regular mortgage payments. If you view the amortization table produced by the mortgage calculator, you see that more and more money will go towards principal, as time goes on. That’s money to you; to your equity.
Bi-weekly mortgage payments not only make your payments small and manageable, they also somewhat minimize the interest paid on your loan.
HOW TO MAKE BI-WEEKLY MORTGAGE PAYMENTS WORK FOR YOU
To pay off a mortgage takes nothing more than sticking to the amortization schedule produced by the mortgage calculator. If you find that not fast enough, there are many ways to speed things up:
- Annual lump sum payments go right off the tail end of the mortgage (most lenders will allow a certain amount without charging you a penalty);
- Increased regular mortgage payments also come off the end of the loan (most lenders will allow this too without charging a penalty);
- Increased payment frequency cuts on the amount of interim interest paid (this is the principle of the bi-weekly mortgage payments).
- Of course, being able to use these strategies requires financial plan. Heavy budgeting, cutting back on less necessary purchases and general frugality will pay off in the end.
As grave as it sounds that you may be carrying a mortgage into your retirement years, there’s one rarely-discussed alternative that about 25% of Canadians will be stuck with: to pay monthly rent in your retirement years. You’d be stuck paying market rents until “the end”. How depressing is that?
Making bi-weekly mortgage payments is ideal for those that get paid exactly the same every two weeks. It makes budgeting easier.
MAKING BI-WEEKLY MORTGAGE PAYMENTS HAS ITS BENEFITS
Perhaps, making mortgage payments is not ideal in most people’s view. Yet, the prospect of having to make rent payments until the day you die is possibly much worse. When making mortgage payments, you’re at least contributing to your financial future, even when you’re retired. Not so with rent payments.
Most people would consider rent money like throwing it out the window. As a tenant, you will have no equity at all in your home. A mortgage calculator will show you how it can also be done: by putting money into your own pockets.
In that light, making mortgage payments for a few more years after retirement doesn’t sound like it’s the end of the world, or does it? After a number of years, the mortgage WILL be paid off – and you’ll own the property free and clear. Why not make the mortgage payments more bearable by converting them into bi-weekly mortgage payments?
Just as you thought we’d gone over all the possibilities of finding alternatives for carrying mortgage debt into retirement, here comes the best one of them all: move to the Victoria area. Since homes are much less expensive here, your mortgage will be much smaller and paid off quicker. And again, bi-weekly mortgage payments may be the way to go.
Victoria bi-weekly mortgage payments, this and other mortgage topics are discussed in the blog articles highlighted below. Hyperlinks are conveniently provided.
MORTGAGE FINANCING is complicated. A financial expert can tell you more about this. Please do not extract financial advice from these blog pages. They are not intended for that. Merely, this is a forum. Here are some other blog articles about mortgage financing and mortgage calculators through any of the links below:
Should we expect higher mortgage rates? http://www.lotuslandrealestate.com/rising-mortgage-rates/.
Advice for mortgage borrowers: http://www.lotuslandrealestate.com/real-estate-professional/.
Best mortgage rates are here now: http://www.lotuslandrealestate.com/best-rates/.
Bi-weekly mortgage payments and other financial advice: http://www.lotuslandrealestate.com/category/financial-advice/.
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