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5 Reasons You Should Make Biweekly Mortgage Payments

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Maybe you’ve heard whispers among friends and family that making biweekly mortgage payments — once every two weeks instead of once a month — can help you pay off your loan sooner. In most cases that’s true, but did you know there are a ton of other benefits, as well?

If you’re intrigued, stay tuned. We’ll show you exactly how to make biweekly payments work for you and the benefits.

The secret extra payment

If you’re like most people paying your mortgage once per month, you’ll get 12 full mortgage payments in a year.

But what if you make biweekly payments? In that case, either you or your lender will split your payments in half and submit a payment twice each month. For example, if you normally make a $1,000 monthly mortgage payment, you’ll instead make a $500 mortgage payment every two weeks.

This leads to the quirk in the calendar that lets you get ahead. There aren’t a uniform number of days in each month, and so by making biweekly mortgage payments, you’ll make 26 “half-payments,” or 13 “full” payments per year instead of the normal 12 payments. In other words, you make one extra full payment per year, and you won’t even feel it because you’ve budgeted for it.

This extra payment might not seem like much, but over the course of the loan, it has huge effects.

Let’s look at an example. Say you just bought a house and have a $200,000 mortgage with a 30-year loan term, and your interest rate is 4.125% APR. Here’s what will happen if you stick to the regular monthly mortgage plan, versus opting for biweekly mortgage payments:

 

Monthly Payment

Biweekly Payment

Payment amount

$775.44

$387.72

Number of payments per year

12

26

Total Paid per Year

$9,305.28

$10,080.72

Number of Years

30

25 years and 10 months

Total Interest Paid

$119,158.25

$100,077.57

Total cost

$325,158.25

$306,077.57

In this example, making biweekly payments allows you to pay off your mortgage a full four years and two months earlier, and saves you $19,080.68 to boot.

One caveat: Rarely, some lenders will charge you to make biweekly payments, since it’s essentially twice as much work for them to process. If your lender does this, it may be better to stick with your normal monthly payment plan. If you want to make biweekly payments, you can still do so manually for free by setting aside a portion of your paycheck on your own, paying your normal monthly payment, and then submitting an extra payment once per year.

The case for making biweekly mortgage payments

1. Build equity faster

Home equity is the amount of your home that you actually own versus how much you owe your mortgage lender. For example, if your home is worth $200,000 and you still owe $150,000 on your mortgage, you have $50,000 of home equity.

One of the biggest benefits of making biweekly mortgage payments is that you build home equity faster. You may not realize it, but when you are in the early years as a mortgage borrower, the vast majority of your mortgage payment goes toward interest — not the principal balance on your loan. And until you are significantly chipping away at that principal loan balance, you aren’t actually gaining equity (unless, of course, the value of the home increases enough to eclipse your mortgage loan balance).

When you make biweekly payments and manage to squeeze in that extra payment each year, you’ll be making extra payments toward reducing the balance of your loan. And that extra payment will give you a small push toward building equity.

There are a lot of advantages to having as much home equity as possible. If you have enough home equity, you can take out a home equity loan to finance things like home repairs or remodels, for example.

Another example where having more home equity can help you is when you sell your house. Many homeowners are surprised how expensive it can be when they go to sell their home, all thanks to closing costs, which can amount to tens of thousands of dollars on top of your original loan.

That’s a big problem if you don’t have enough equity built up in your home to cover the cost. You might end up actually having to pay to sell your home, and losing your down payment money for your next home to boot. One of the best ways to guard against this is to build up as much home equity as you can as fast as you can, and making biweekly mortgage payments is a good way to do that.

2. Pay less interest over time

When you make a mortgage payment, the bank actually splits up up the money and divvies it out to various things. During the first few years after you take out your mortgage, most of the money will be going toward interest and very little will be going to reducing the balance of your loan (sadly). This process is called amortization, and anyone who’s ever had a loan literally had to pay their dues, especially during those first few years.

But, again, here’s where making biweekly mortgage payments can really help you. Since you’ll be making an extra payment each year, you’ll pay down the principal even faster. This means that each interest payment thereafter will be smaller than if you hadn’t made that extra payment.

Over the course of your loan, this can save you a huge amount of money. For example, if you have a $400,000 mortgage, making biweekly mortgage payments can save you over $38,000 in interest.

3. Pay off your mortgage faster

If you make biweekly payments, you’ll be chipping away at your principal balance faster than normal. We won’t lie — it’ll still seem like you’re paying off the mortgage at a glacial pace, but you’ll have a slightly sharper pick than your neighbor making monthly payments.

If you have a $300,000 mortgage and you’re making biweekly mortgage payments, you can actually shave off four years and two months from your loan. Instead of being in debt for 30 years, you’ll only be in debt for 25 years and 10 months.

4. Drop your PMI payment sooner

In 2017, the average homebuyer bought their home with a 10% down payment. That’s not bad, but for most conventional loans (not including FHA, VA and USDA loans), you’ll need a down payment of at least 20% to avoid paying for private mortgage insurance each month. This fee, which is tacked onto your monthly mortgage payment, protects your lender in case you default on your loan. In other words, it doesn’t even protect you—it protects your lender in case you mess up.

Once you reach 20% equity in your home, you can ask your conventional lender to cancel your PMI payments. If you make biweekly payments, you can actually get there a lot faster because you’ll be paying down the balance of your loan quicker than normal.

Let’s look at an example. If you have a $350,000 mortgage and only put down 10% like most people, you’d owe an extra $164.06 each month to pay for PMI. If you make biweekly payments, you’ll hit 20% equity 13 months sooner than if you were making monthly mortgage payments. That’ll save you an extra $2,132.78 in PMI charges.

5. It’s easier to budget

Even if you’re a super budgeter and on top of your finances, saying goodbye to so much cash at once hurts.

If nothing else, biweekly mortgage payments take the stress out of those big payments. If you’re paid biweekly, it’s even easier — just send in the check each time you get paid, if that’s the due date that you agree on with your lender.

That way, the money won’t be sitting in your account until next month, just begging to be spent on something else and leaving you short of the bill when your monthly mortgage payment does come due. Making biweekly payments in this way can save you a ton of stress in addition to all the financial benefits.

Closing

By default, almost everyone is put on a monthly repayment plan. It’s how we’re conditioned to think about debt: after all, just about every type of loan is paid back on a monthly basis, including credit cards, student loans, auto loans and personal loans. In some cases, like for student loans, you may be able to switch to a biweekly payment plan, but it’s not very common.

That doesn’t mean you need to stick with the mold, though. We’ve shown five great benefits to switching over to a biweekly mortgage payment plan. You’ll:

  • Build equity faster
  • Pay less interest over time
  • Pay off your mortgage faster
  • Drop your PMI payment sooner
  • Budget for housing more easily

If you’re interested in switching to a biweekly mortgage payment plan, the next step is to contact your lender to ask about it. Your future self will thank you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Mississippi First-Time Homebuyer Programs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Intro

New homebuyers looking to buy in Mississippi, home of the moody blues and blooming magnolia trees, may be able to find local assistance programs to help make the purchase possible. These programs target first-time homebuyers by helping with down payments, closing costs and monthly payments.

Mississippi also offers counseling services that cover anything from buying a home to foreclosures, along with educational courses ideal for first-time buyers. If you’re interested in buying in Mississippi and want to learn more about the various programs offered, read on to determine which might be a good fit for you.

Mississippi first-time homebuyer programs

The Mississippi Home Corp. (MHC) offers several programs geared toward helping first-time homebuyers purchase a home. The agency first came about in 1989, with the help of the Mississippi Home Corp. act, to provide affordable and safe housing to its residents. These programs can offer anything from deferred loan payments to tax credits that can help save extra money.

Eligibility for Mississippi assistance

While all of these homebuyer assistance programs have individual eligibility rules and regulations, most tend to look at a few major criteria, such as a homebuyer’s income, credit score, legal residency and previous homeownership.

Smart Solution Mortgage

Smart Solution Mortgage teams up with participating lenders to offer loans with competitive rates and down payment assistance. It also provides its Smart Solution Second, which is geared toward those who need a second mortgage by offering 3.5% down payment.

What is it?

  • A 30-year fixed rate
  • Offers cheaper mortgage insurance premiums
  • Offers the option to combine a Mortgage Credit Certificate (MCC) with the possibility of claiming 40% of mortgage interest (up to $2,000 per year) as credit on federal income taxes and using the rest as a deduction

Requirements

  • Must be the buyer’s primary residence
  • Household income cannot be more than $95,000 per year
  • Must be U.S. resident
  • Minimum credit score of 620 (for Federal Housing Administration [FHA], U.S. Department of Agriculture [USDA] or U.S. Department of Veterans Affairs [VA] loans and conventional loans)
  • The property (new or existing) must be in Mississippi and should be one of the following: single-family home, condominium, townhouse or duplex

MRB 7

Mortgage Revenue Bonds program (or MRB 7) helps ease the burden of coming up with a down payment by providing $7,000 to be put toward it.

What is it?

  • A 30-year fixed rate mortgage
  • The buyer has various loan options (FHA, VA, USDA Rural Development and Fannie Mae/Freddie Mac Loans)
  • No restrictions on liquid assets
  • Offers down payment assistance
  • Also offers a 10-year deferred second mortgage with no interest, which can be forgivable after 10 years

Requirements

  • Must be a first-time homebuyer (not allowed to have owned a residence in the past three years), but veterans and residents in “target areas” such as Pike and Sharkey counties, are exempt.
  • Need to meet credit requirements and loan-underwriting requirements, depending on the specific product.
  • Income level cannot exceed maximum in the county in which you plan to live. For example, Clarke County residents with a household of one or two cannot exceed $52,800 in income, and those with three or more max out at $60,720.
  • Must be a U.S. resident.
  • The property must be in Mississippi and can be either a new or existing single-family home, condominium or townhouse.
  • Purchase price must not exceed maximum for specific county.

Housing Assistance for Teachers (HAT)

The Housing Assistance for Teachers Program (HAT) offers homebuying assistance to teachers who want to live in rural Mississippi, where there is a shortage of educators.

What is it?

  • A 25- or 30-year fixed-rate loan that provides up to $6,000 toward closing costs
  • Offers down payment assistance
  • Has no income limits (except when pairing HAT with another MHC loan)

Requirements

  • Must be a teacher for three years in a school district with a shortage of educators.
  • Must meet certain credit requirements.
  • Required to pay at least 1% of the property price for the down payment along with one month’s reserves.
  • The property location needs to be within an eligible county, such as Bolivar or Marshall. Loan-to-value ratio (LTV) cannot be more than 97%.
  • Must have an acceptable credit score (required credit score varies depending on LTV).
  • Must have mortgage insurance, depending on LTV.

Mortgage Credit Certificate (MCC)

The Mortgage Credit Certificate (MCC) can provide a tax credit up to 40% of the loan’s annual interest (actual amount depends on interest already paid), allowing for a possible 60% to be used as a deduction.

What is it?

  • A tax credit of up to 40%
  • The credit can be combined with MHC’s other programs and various loan products (conventional, FHA, VA and RD financing)

Requirements

  • Must be a first-time homebuyer (those in “target areas,” including Benton and Copiah, are exempt).
  • Can’t exceed household income limits, which vary by county. Clay County, for example, cannot exceed $63,360 for a household of one to two, or $73,920 for three or more.
  • The tax credit cannot be more than $2,000 per year.
  • Must live in a single-family home as permanent residence, and all manufactured homes need to be approved by the U.S. Department of Housing and Urban Development (HUD)
  • Purchase price must not exceed limits for specific county.
  • Must pay a $300 non-refundable reservation fee.
  • Must provide property sales contract and federal income tax returns (from the last three years).
  • Must complete a homebuyer education course.

How to apply

To apply for any of the homebuyer assistance programs with the Mississippi Home Corp., you will need to work with a participating lender. You can start this process by searching the agency’s website for a participating lender and reach out to them directly.

These lenders will be able to match you with the specific program(s) that work best for your needs, depending on your financial profile and credit history. Your income and credit score will be considered, along with the county where you are looking to purchase your new home.

National first-time homebuyer programs

Mississippi has many different programs that can come in handy when you’re looking to buy your first home there. However, the state may not have the perfect program that works for you. If that is the case, you may want to look into other programs that are available nationwide. Some of these programs include the USDA Rural Development program targeting lower-income residents who want to buy a home in a specified rural area, along with Habitat for Humanity, the FHA and the VA. Learn more about these programs by checking out LendingTree’s general guide to first-time homebuyer programs. LendingTree owns MagnifyMoney.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Carissa Chesanek
Carissa Chesanek |

Carissa Chesanek is a writer at MagnifyMoney. You can email Carissa here

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Kansas First-Time Homebuyer Programs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you’re drawn to midwestern friendliness, wide open spaces and affordable homes, there’s no place like Kansas to settle down. And if you need help coming up with a down payment on your first home, or you want to keep your mortgage affordable, the state may have a program for you.

The Sunflower State offers one first-time homebuyer program that provides assistance with your down payment and other homebuying costs in the form of a forgivable loan. And to help increase the number of homebuying assistance options, two Kansas counties joined to create another statewide program open to first-time homebuyers. Because the state has fewer programs than many other states, Kansans might also want to look at federal and local first-time homebuyer programs to increase the chances of finding a program that fits their needs.

In January 2019, we researched first-time homebuyer programs in Kansas. This included reviewing the Kansas Housing Resources Corporation website and other state resources. We put together the information you need to know in this guide.

Kansas first-time homebuyer programs

The first program on our list is offered through the Kansas Housing Resources Corporation (KHRC), a public corporation that runs housing programs in Kansas. The mission of the KHRC is to increase the availability of affordable, quality housing for Kansas residents. The organization oversees more than 25 affordable housing programs, one of which is designed to help first-time homebuyers.

Another statewide program open to first-time homebuyers is sponsored by two Kansas counties, Sedgewick and Shawnee. The program offers grants of up to 5% of a home’s purchase price to help with closing costs and down payment, along with extra subsidies for very low-income homebuyers. The program also now offers a zero-interest second mortgage that is forgivable after one year for homebuyers who qualify.

Requirements for Kansas assistance

Homebuyers who want to use a Kansas first-time homebuyer program must have a household income that falls within program requirements and must be buying a home within an eligible area in the state.

First Time Homebuyer Program

The First Time Homebuyer Program (FTHB) from the state of Kansas offers assistance with down payments, closing costs and legal fees to help first-time homebuyers who meet income requirements. Homebuyers who stay in their home for 10 years or longer may not have to repay any of the funds they receive.

What is it?

The First Time Homebuyer Program offers

  • A subsidy divided into two equal parts: a loan that may be forgiven over five years if the amount is under $15,000 or 10 years if it is $15,000 or more, and a loan that must be repaid on the sale of the house only if the house is sold within 10 years of the date of purchase.
  • A loan for 15% to 20% of the total purchase price of the home, depending on the homebuyer’s income.

Requirements

In order to be eligible to participate in the First Time Homebuyer Program, you must

  • Have not owned a home in the past three years OR be either a manufactured home owner, a single parent or a displaced homemaker. A displaced homemaker is defined as someone who has worked mainly in the home without pay and is experiencing difficulty finding paid employment.
  • Have income at or below 80% of the area median income (AMI).
  • Not be buying within the city limits of Kansas City, Lawrence, Topeka or Wichita.
  • Not be buying within the limits of Johnson County, which includes the cities of Olathe and Overland Park.
  • Put down the greater of 2% of the purchase price or $500 with your own funds.
  • Live in the purchased home as your primary residence.

How to apply

To apply for the First Time Homebuyer program in Kansas, you’ll need to contact a KHRC-approved lender that participates in the program. The lender you choose will ask questions to determine whether you qualify for the First Time Homebuyer Program and will walk you through the application process.

If you’re planning to buy in one of the top six largest cities in Kansas that are excluded from the program, you may want to check to see if the local government offers a first-time homebuyer program. For example, the City of Wichita offers the HOMEOwnership 80 program for first-time homebuyers buying in certain areas, and Topeka offers the Topeka Opportunity to Own (TOTO) program for first-time homebuyers.

Learn more

Kansas Housing Assistance Program

The Kansas Housing Assistance Program (KHAP) was created by two Kansas counties, but residents across the state can take advantage of it. It’s available to first-time and repeat homebuyers with low or modest incomes. In addition to a 30-year mortgage, it offers a grant to help with home down payment or closing costs. A new enhancement to the program (see Kansas Kick Start below) also offers a forgivable second mortgage to qualifying first-time homebuyers.

What is it?

The Kansas Housing Assistance Program offers

  • A 30-year fixed rate mortgage
  • A grant of up to 5% of the home purchase price to help with closing costs or a down payment on the home. Grant percentage varies based on whether you get a conventional loan (up to 5%), FHA loan (4%), USDA loan (2%), or VA mortgage (2%).
  • An extra subsidy on conventional loans of up to $1,500 (for buyers who are above 50% but below 80% of the area median income [AMI]) or $2,500 (for buyers below 50% of the AMI).

Requirements

You do not need to be a first-time homebuyer to qualify for KHAP. However, you must

  • Have a credit score of at least 640 (for conventional, VA and USDA loans) or at least 660 (for FHA loans).
  • Buy either a detached single-family home, a condo, a townhome or a duplex (with one unit occupied by you).
  • Meet income limits that vary based on the location of your home and the type of mortgage.
  • Be buying a home priced at $453,100 or less.

How to apply

To get started with KHAP, contact a participating lender. The lender will ask questions to determine whether you qualify and will help you apply for the program. Find a lender on the KHAP list of lenders.

Kansas Kick Start

Kansas Kick Start is a new offer that is part of the Kansas Housing Assistance Program and can provide additional funds to first-time homebuyers. It offers a flat sum as a forgivable second mortgage.

What is it?

The Kansas Kick Start enhancement to the KHAP program offers

  • A flat amount of $7,000 as a zero-interest second mortgage that is forgivable in one year.
  • The option to be used along with a 1% or 2% KHAP grant.
  • The option be “stacked” with other funding sources.

Requirements

To qualify for Kansas Kick Start, you must

  • Be a first-time homebuyer.
  • Use a conventional loan to purchase your home.
  • Meet Kansas Kick Start income requirements, which vary based on location and household size.
  • Be buying a home that meets Kansas Kick Start home price limits.
  • Complete a homebuyer education course.
  • Have a credit score of 640 or higher for Freddie Mac HFA Advantage loan.
  • Be buying a single-family property.

How to apply

As mentioned under the Kansas Housing Assistance Program, you must go through a participating lender. To get started, check the KHAP list of lenders.

National first-time homebuyer programs

Many states offer a variety of first-time homebuyer programs to allow homebuyers to find a program that fits. Because Kansas offers only one program specifically targeted at first-time homebuyers, Sunflower State buyers might want to expand their options by looking at federal first-time homebuyer programs. If you’d like to see what federal programs are open to you, check out LendingTree’s guide to first-time homebuyer programs before you go looking for your dream home. (LendingTree owns MagnifyMoney.)

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Allie Johnson
Allie Johnson |

Allie Johnson is a writer at MagnifyMoney. You can email Allie here

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