1. Does a Biweekly Mortgage Program ChangeDoes a Biweekly Mortgage Program Change
My Interest Rate?My Interest Rate?

2. There is often some confusion about "interest rate" when
people look at a biweekly mortgage program. While it's
true that a biweekly mortgage actually helps you build up
your equity faster by paying down the principal quicker
than normal mortgage repayment, it's not true that it
reduces the actual interest rate of your mortgage loan.

3. In essence, there are some people that advertise "biweekly
mortgages" and really what we're talking about here is a
bi-weekly mortgage program that operates independent of
the mortgage itself. Typically these are managed by third
party companies, independent from your mortgage lender.
Paying the principal down faster actually results in a
reduction of the "effective interest rate" on your mortgage.

4. Note that I said "effective interest rate" and that the actual
interest rate of your mortgage is always determined by the
original contract between you and the lender. The same
contract you signed at the beginning of the origination of
your loan. The effective interest rate is in reality - the
mathematical or the biweekly mortgage calculator of
interest incurred by you over the life of the loan.

5. For instance on a 30-year fixed loan at $200,000 loan
amount with a 7% interest rate, you pay that same loan off
in 23.5 years and your effective interest rate would be
closer to 5.2%. Remember that the actual note rate of
your mortgage remains the same; but since you are
paying off the principle faster with your plan the effective
rate of interest is reduced. All of this can be discovered
through the use of a biweeky mortgage calculator.

6. In essence, the life of the loan would now be is 23.5 years
(instead of the original 30) and since you've paid that loan
off sooner and saved over $71,000 in interest payments,
you've effectively only paid 5.2% interest rather than the
7% that was originally agreed upon on the original
paperwork and contract between you and your lender. The
actual note rate doesn't change, but the effective amount
of interest you payback on your loan is reduced due to the
acceleration of the payments.

7. In essence, the life of the loan would now be is 23.5 years
(instead of the original 30) and since you've paid that loan
off sooner and saved over $71,000 in interest payments,
you've effectively only paid 5.2% interest rather than the
7% that was originally agreed upon on the original
paperwork and contract between you and your lender. The
actual note rate doesn't change, but the effective amount
of interest you payback on your loan is reduced due to the
acceleration of the payments.