The typical bi-weekly mortgage plan can not only shorten the terms of your mortgage loan, it can also dramatically reduce the effective interest rate you pay. What does this mean?
If you have a 30 year mortgage and your rate of interest is 7.5% annually, using a bi-weekly payment plan reduces the principal balance of your loan much faster. The result is that the amount of interest you pay is reduced accordingly. As a result, you could easily take a 7.5% rate, and the effective interest you would pay could be equal to 6.15%, all without ever refinancing. So, if you have a 6% rate of interest, your bi-weekly payment plan can reduce the effective interest rate to 4.875%.
Before considering refinancing for the sake of an interest rate reduction, be sure to take a look at the benefits of a bi-weekly payment plan. It offers you a very viable alternative for financial planning purposes.
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