Mortgage Specialist Toronto Advice: Biweekly Mortgage Payments

What is a biweekly Mortgage?

Most of the top performing mortgage specialist Toronto today would encourage their clients to take on instead a biweekly mortgage payment in order for them to complete their payment obligations to it fast. And this seems to be the fad today. But does it really work and most importantly is it beneficial to a homebuyer who is planning to acquire a house soon?

A biweekly mortgage payment is a commitment from the part of the homebuyer to make one-half payment for his mortgage every two weeks as opposed to making a “full payment” in a month. And instead of the usual 12 payments per annum, the homeowner would have made 13 payments overall. This payment scheme recommended by most top performing mortgage brokers in Toronto is beneficial to a homeowner in such a way that they are able to accelerate their payoff schedule by as much as 7 years.

Doing 12 Payments In a Year

In a typical mortgage program, a homeowner is necessitated to commit to making monthly regular payments. This will render him to complete 12 payments in a year, provided he is faithfully committed to making his monthly payment obligation. He would need to make a total of 360 payments to complete full payment on the loan, that is if he opted for a 30 year fixed rate mortgage term.

All payments you make will be divided into two parts, one part is for the interest portion and another part of the principal portion. The amount of money allocated for the principal portion will go to the loan that you have with, say a bank. It will significantly reduce the amount of your loan balance.

The remaining principal and interest balance on your mortgage payment will shift as your loan gradually moves closer and closer towards its maturity. There was a time before when a huge percentage of the mortgage payment is allotted mainly for the interest while the remaining portion would be used to settle the balance.

Unknown to many of us, this explains the reason why even after 5 or 6 years or so of making payment for your mortgage, it remains barely paid up. Technically speaking, this schedule format is responsible for that. The major repayment is referred to as the amortization.

Biweekly Schedule: Doing 13 Counts of Payment in a Year

The primary intention why a biweekly mortgage program came into being is to cut short a homeowner’s amortization schedule. As opposed to the usual 12 payments in a year for a mortgage, the biweekly mortgage program requires a homeowner to make 13 payments instead. And it is done by observing and keeping a fortnightly payment schedule, hence the name.

A certain amount of interest will have to be paid on a yearly basis when using a biweekly mortgage plan. Usually, it is covered in the first 12 months of payment made. And as for the 13th month, it will have to go somewhere. Even though it will be applied to your remaining principal, which is the amount of money that you still owe to the banking institution.

With the prevailing mortgage rates that we have today, loan borrowers can easily shorten their loan amounts by as much as 4 years if they will opt to have a biweekly mortgage payment plan.

Is Biweekly Mortgage Program Suitable for You, too?

If you do the basic math, the computation about it, you will easily understand that biweekly mortgage will work and definitely does not hold empty promises to borrowers. But there are several few reasons why homeowners may hold themselves back from availing themselves a biweekly mortgage plan.

One of the most common reasons why homebuyers opt not to enroll themselves in a biweekly mortgage plan offered by, say, a banking institution, and to have a self-managed biweekly mortgage payment instead is because they know that they will get far better results as opposed to a bank-managed biweekly mortgage payment schedule.

To give you an idea how you can go about in doing a self-manage of your biweekly mortgage payment, you can start by just going about your regular monthly mortgage payment first, but try adding an extra 1/12 of the amount of your regular monthly mortgage payment. Say for instance that you are making at least $1200 monthly mortgage payment. So what you will do on your next cycle is to add $100 more to your payment, thus, making it $1300, At the end of each year, or at the lapse of the 12th month after,you would have made a month of an over payment which is considered your 13th payment month.Banks will not apply your 13th-month pay until such time that the year is complete already. This will go in contrast to your own self-managed biweekly mortgage payment which applies 12 times annually.

You are still bound to get the very same results, though, when you opt for a self-managed biweekly mortgage payment but with the complete absence of a financial obligation to, say, a bank. For better understanding, let us say for instance that the Christmas holidays are coming soon and you want to deliberately skip making an extra payment for your mortgage for the months of November and December, then you can do so simply because you are not bound by a contract. Then, maybe a few months after, when your finances are back on track again you may double-up the payments you are making so as to cover the extra payments that you’ve skipped.

If you are still in doubt that a bank managed biweekly mortgage plan is bringing along a lot of risks to you as the loan borrower, you may want to verify from your lender if they have any charges for you when you are opting to apply for a biweekly mortgage plan with them. There are a number of banking institutions that does this, and that definitely is going to be a waste of your money since it has no return benefits to you in the end.

Should your bank or private lender proactively offered you a biweekly mortgage plan, you can just simply decline that offer for good. You are doing yourself a favor that way. I highly recommend that you initiate a biweekly payment of your mortgage on your own.

Why I Would Discourage You from Biweekly Mortgage

The main purpose of a biweekly mortgage program is to help redeem you from your loaned amount and to get you closer to your loan’s paid off date. In short, it is designed to help you bypass the drudgery of paying your loan in a long term by increasing your frequency of payment schedule. Hence, it provides significant help in building up your equity.

Although biweekly mortgage, by its design, structure, and purpose, is good and intended to benefit the homeowner or the loan borrower but it seems to serve this purpose only when it is not managed or under the shadow of your bank or private lender. Changes on it are bound to happen in the absence of a contract.

Now exactly, what do I mean by this?

If you have an existing property loan and expressed your desire to have it set up for a biweekly mortgage instead, your bank or private lender may have you pay the set fee for that particular conversion. Furthermore, your bank may also even charge you for the automatic transfer of funds twice a month from your savings or checking account with them. All I mean is why would you settle for this kind of biweekly mortgage set up from your bank when you can do it on your own, without any fees.

Another disadvantage when signing up for a biweekly mortgage with a bank or private lender is that you are obligated to pay up every other week. You are not allowed to skip since you are under a contract. If you do, you run the risk of getting penalized by them or you will be charged an extra fee for skipping a payment whereas if you are just doing your biweekly payments on your own initiative, you may skip once or twice if you need to use the funds somewhere else and would not have to worry about anything. Then, after some time, you can pay for the skipped months so you will still have completed 13 months at the lapse of 1 year for your mortgage. Should you require more information about biweekly mortgage, you may consult your trusted mortgage specialist Toronto for this.

Commercial Mortgage Broker Advice: Be on a Biweekly Mortgage Payment

If your commercial mortgage broker tells you that with a biweekly mortgage payment, you can settle your mortgage obligations fast, would you consider it?

Yes, common sense will tell you that you will benefit from this payment schedule. It is a given, by doing simple math, that a bi-weekly or fortnightly mortgage payment will indeed help you finish paying your mortgage faster. However, you also need to be aware that there are some stumbling blocks along the way that might keep you from doing so. The secret to getting past these perceived barriers lies in knowing everything there is to know about completing your mortgage payments fast.

Many people today are not even aware that banks can sometimes become very scheming too in the sense that they can actually hinder you from completing your mortgage payments early and if they are getting a hunch that you are trying to get ahead of your mortgage payments, they can inconspicuous ways to keep you out of focus. This can happen to anyone of us, and the sad part is we are not even aware of it. One common mistake that people have is that they never try to avoid the ‘trap’ that their banks have put up against them. Your best defense against this, though, is nothing less than knowing exactly the proper way of doing your bi-weekly payments.

You should start by making regular payments of your mortgage on the same day, every 2nd week of every month. If you will just remain faithful to this routine and keep up with it, you would be surprised that by year end, you would have paid more than half of what you are supposed to pay with whatever monthly payment schedule you are trying to observe.

And since not all the months have 31 days, what you can do instead is to map out your bi-weekly schedule so you’d know in advance when you are supposed to make payments again. It’s as simple as that. If you are still not convinced, you may want to make some calculations on your own. It will help if you can see that by end of the year, if you make use of a bi-weekly payment method, it will show you have paid more than you are supposed to. You should now see that even if there are possible risks of a spike in interest rates at any given time of a year, it can still work.

To give you an idea on how you can go about this method seamlessly, you need a closer look into your entire mortgage and determine the total amount that you will owe for that year alone. Next, you have to cut in half the amount of money that you owe for each month. Then multiply it by 26, and once done you would see that you would have paid $2000 more as opposed to your original annual payment schedule.

In a given situation when you are encountering financial difficulty, missing out once or twice in your payment schedule would not hurt you significantly. If that happens you can just make up for the lost opportunity by just settling your next schedule and doubling it up when your finances have become more stable. Finding the right commercial mortgage broker, though, is crucial here because such a professional has all the needed expertise in this field. He can help you understand the implication of every action you may have in mind.

Effective Ways to Getting a Mortgage Fast

Getting a mortgage is undoubtedly a big financial commitment to make. And naturally, every one of us, who are in the right property-buying age, would want to have nothing less but the best deal there is.  Fortunately, there are a number of things you can do if you want to improve your chances of securing a mortgage in a snap. The following pointers that I have here can be used as a guide. 

Improve Your Credit Rating First

Before you embark on making an investment in the property market, make sure that you have an excellent credit score. Your credit score will have a direct impact on how much interest rate you are going to be given when you apply for a mortgage. The higher your credit score is, the better because you will be given a lower interest rate for your mortgage.

If in case that you have a not so stellar credit score, don’t lose heart because you can still improve it. One technique that I suggest you make is to discard unused credit cards and settle any pending credits that you have. It might take at least 6 months before this will reflect on your record. Additionally, while trying to improve your rating, don’t attempt to apply for any loan as it will influence your mortgage application interest rate. As much as possible you should be debt-free when applying for a mortgage. 

Manage Your Finances Well

It is very crucial that you handle your finances really well. Prior to the approval of your mortgage application, anticipate if you can realistically afford the monthly repayments for it without running the risk of compromising your other monthly financial obligations such as utility bills. 


Avoid Switching Jobs

One common mistake that most people commit is that they hop from one job to another. When private lenders and financial institutions conduct a background investigation, part of their protocol is to verify your work history. They will favor mortgage applicants who were able to stick to their jobs for a longer period of time, as opposed to those who has the habit of switching from one employment to another. Job hopping gives them a not so good impression of you, and may adversely influence your chances of getting lower interest rate for your mortgage. 


Prepare  to Present Your Proof of Income

Most of the private lenders and even the financial institutions, as part of their requirements, will necessitate you to furnish for them a proof your annual income. This will give them a good idea if you are in a good financial standing and if you can definitely afford repayment for your monthly mortgage. What comes with the annual income are your tax deductions, too. 


Seek Professional Assistance from a Mortgage Broker

The main function of a mortgage broker is to help people who are in your situation. Their industry expertise makes them more than just qualified to give you give you good guidance on how to go about your mortgage application process, seamlessly and hassle-free. People who go on to seek help from a reputable mortgage broker often find very satisfying results with respect to the mortgage rates that they were given. 

With respect to how much money you’d be able to borrow, your mortgage broker will address that for you. He will calculate the amount of money that you can possibly borrow based upon the requirements that you were able to furnish such as credit rating, annual salary, etc. 

The pointers given above are based upon the collective experience that I and my friends have. We are presenting them here in an effort to help out someone who has no background at all in home-buying and property acquisition process. 

Unfortunately, there are no shortcuts in getting a mortgage fast, but you can save yourself from frustration and unmet expectations by heeding the pointers I’ve given here.