Simple Interest Bi-Weekly Mortgage
- A bi-weekly mortgage payment plan in which the payments made by the borrower are applied immediately toward the remaining principal balance of the mortgage as they are received. This differs from a traditional bi-weekly plan, where the first payment received during a month is held by the servicer of the mortgage until the second payment for that month is received; only then is the sum of the two payments is applied toward the remaining principal balance of the mortgage.
A simple interest bi-weekly mortgage plan creates greater interest savings than a bi-weekly plan where two payments are first received before any amount is applied toward the remaining principal balance of the mortgage. Under a simple interest bi-weekly plan, when the first payment is immediately applied toward the principal balance, interest is no longer charged on that part of the principal balance as it would have been had the payment been held until the second payment in the month arrives.
Investment dictionary. Academic. 2012.
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