A mortgage is probably the biggest payment that most people make each month. For many the payment is almost prohibitively large. It affects all aspects of our lives, what we do, where we go, who we go out with. For many the signing of a mortgage contract is a financial commitment similar in many ways to a marriage. It may sound strange, but it probably makes sense to pay more on a mortgage every month.

Why is this?

The obvious answer would be that you can finish payments earlier. The calculations are actually simple. A mortgage company will charge less interest over time and therefore you save money in the long run, especially for those mortgages which could run for 20 years or longer. There are many mortgage companies offering mortgages known as bi-weekly mortgages, specially set up to make extra payments and therefore cost the consumer less money in the long run.

But how does this work, and why do more people not do it?

In a bi-weekly payment scheme the lender accepts 2 payments per month thereby making 13 payments a year rather than 1 per calendar month, thereby saving a little money each month by reducing the amount of interest that is calculated off your outstanding unpaid sum. However, the key, as with any product, is to analyse things on a case-by-case basis and also analyse, asking detailed questions on mortgage lenders operating methods.

If, for example you make bi-weekly payments but the mortgage lender only credits your account monthly the end result is exactly the same, yes it is a bi-weekly mortgage but the only gain would be convenience for people who are paid twice monthly rather than monthly. Also, most bi-weekly payment plans come with a higher interest rate. It may be possible however to just set up your existing mortgage to accept extra payments, they will likely levy a fee for this however you may still be saving money. It helps to do the maths.

It may also be wiser to set up a payment scheme on your own that will facilitate extra payments through a bank account or maybe set up a savings account into which you heap a sum with which to pay off the mortgage in lump sums, this way you also accrue positive interest and while it is unlikely to match the percentage of the mortgage its better than nothing. However it may be your mortgage provider will levy a heavy sum for one-off payments. Again, check the details and check if you really are to make savings in the long run, and choose a payment plan to suit you.