Biweeky Mortgages Being Used More
Sloane, Leonard, THE JOURNAL RECORD
NEW YORK - More homeowners around the nation are taking advantage of mortgages that require payments every two weeks instead of once a month.
There are two major reasons for the upsurge in biweekly mortgages this year.
First, the Federal National Mortgage Association, a federally charted private company that invests in home mortgages, recently created a market for them, and that has helped to make them more available to consumers.
Second, some banks and marketing companies are now developing ways for holders of monthly-payment mortgages to switch easily to biweekly ones.
But biweekly mortgages are not for everyone, and represent a small fraction of all mortgages issued.
A biweekly mortgage is best for ``financially sophisticated home buyers, for move-up home owners and for anyone who wants faster equity buildup,'' said Beth Marcus, director of development for the mortgage association, also known as Fannie Mae.
The idea of biweekly mortgages is ``simplicity itself,'' said Paul Havemann, vice president of HSH Associates, a publisher of mortgage information in Riverdale, N.J. ``It's a great disciplinary tool. In a way, it's like a Christmas Club.''
Mark J. Riedy, president of the National Council of Savings Institutions, a trade association, said biweekly mortgages were ``pro-consumer because they equal the paycheck flow.'' About half of the country's work force is paid every two weeks.
Holders of biweekly mortgages make 26 payments of half of what the monthly payment would be - 27 payments in some years, depending on the vagaries of the calendar - and thus make the equivalent of 13 conventional monthly payments. Interest rates are similar to those of conventional mortgages.
Interest and principal are applied every 14 days on a 365-day year. The result: a reduced term for the mortgage, a substantial savings in interest and an acceleration of equity.
Biweekly mortgages originated more than 15 years ago in Canada, where there are no tax deductions for mortgage interest. …