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Are Mortgage Payments Monthly Expenses?

Purchasing a home comes with important financial responsibilities. People usually struggle with understanding how paying back their mortgage functions. I will explain how the payment system works and answer your question – are mortgage payments monthly expenses?

Upon taking out a mortgage, most people usually get two payment options – monthly payments or biweekly mortgage payments. The majority chose to pay once a month, but some opt for paying every two weeks.

Woman in a brown coat holding a credit card

Are Mortgage Payments Monthly Expenses?

They can be if you choose this option. For most people making monthly payments is the most convenient option. You are required to pay on the same day every month. This is great for everyone who wants to have a clear overview of when each payment will be due. Some individuals choose automatic payments of their mortgage so that the money that is intended for the mortgage simply gets withdrawn from the bank account on the appropriate date.

Various dollar banknotes on a white table

What Factors Determine Your Monthly Mortgage Payments?

The factors that will influence your mortgage payments the most are the term and the size of your loan. The size of your mortgage is the money that you borrowed and the term applies to the time you are supposed to pay everything back.

It’s common knowledge that if your aim is to pay the lowest payments, you’d have to settle for a long term. This is why you’ll see an overwhelming number of people taking out 30-year loans.

Additionally, the payments will also be determined by:

  • Property taxes,
  • Down payment,
  • Home price,
  • Homeowners insurance,
  • And interest rate (you can pay a mortgage point for a lower interest rate).

What Are the Drawbacks to Monthly Payments?

The only drawback when it comes to monthly payments is that you won’t have the opportunity to pay down the mortgage more quickly. Budgeting and preparing for the payment is much easier, but it will take a long time until you are done with paying for your personal property.

When you compare monthly to biweekly payments, it’s obvious to notice that the longer you take to finish paying for a mortgage, the more interest on the loan will have to be paid. This applies to any type of situation, whether you’ve chosen to have a fixed, adjustable, or low rate.

It will cost you more to pay for the home than it would have with a biweekly payment or a shorter term.

A big home with a backyard

How Do Biweekly Mortgage Payments Function?

If you don’t want to spend the next thirty years making monthly payments, the alternative is to choose biweekly monthly expenses. When you have to pay every two weeks for the mortgage, it will be easier to save more on the interest of the loan and pay down the entire sum much faster.

Instead of 12 payments every year, you will have 26 payments. However, don’t think that you’d have to pay every two weeks the amount of money that is intended to be paid as a monthly payment. Actually, the biweekly payment equals half of the monthly payment. At the end of the year, you will have one more month paid.

You will finish paying for your principal more quickly than you would with the option of monthly payments. Due to the fact that the payments are going to arrive faster, you probably won’t notice a negative impact on your finances. Even while one extra payment doesn’t seem like something significant, when you take into consideration the term of the loan, it has many advantages.

Gray calculator and black magnifying glass with a lot of papers

One Additional Perk of Biweekly Payments

A great aspect of biweekly mortgage payments is that they will correlate with your paychecks. This is why you can opt for making payments as soon as you get your paycheck; you can make your mortgage payment. You won’t struggle with keeping track of your finances this way. Also, individuals will avoid wavering from their budget.

Use a mortgage calculator online to see whether you will benefit from this kind of mortgage payment strategy. It’s important to figure out what your budget should be each month, so you don’t fall behind with your payments or the mortgage expires.

What Are the Disadvantages of Biweekly Payments?

The possible disadvantage of biweekly payments is that certain lenders could change their fees when making their plan for biweekly payments. This is why it’s important to use the calculator and determine whether your finances can sustain a biweekly payment strategy.

Also, what should be mentioned is that the credit score won’t be enhanced in any way in case you are using biweekly payments. They are not going to have a negative effect on it, and you will have an identical credit rating with either biweekly or monthly payments.

A chart with a laptop

What Is the Amortization Schedule?

The amortization schedule for a mortgage gives a detailed breakdown of how much of every payment goes to PITI. Before looking at what payments will be like, decide what kind of mortgage you want – reverse mortgage, fixed-rate mortgage, or conventional mortgage. You’ll see in the table below what your payments will consist of. It’s obvious that during the initial year the payments entail mostly interest payments, whereas the subsequent years are intended to pay back principal payments.

PaymentPrincipalInterestPrincipal Balance
1$99.55$500.00$99,900.45
12$105.16$494.39$98,772.00
180$243.09$356.46$72,048.98
360$597.00$2.99$0

Now You Can Choose Your Payment Option

It can be tricky when it comes to determining what payment option will work the best for your financial situation. First, you should determine what your priorities are. If you want to pay a lower payment over an extended period of time, monthly payments are the best for you. But, if you want to pay the entire sum as fast as possible, it’s best to choose biweekly payments. It’s wise to use a mortgage calculator online or ask a mortgage broker when you want to make a decision about taking out a loan.