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Biweekly Mortgage Payments: Are They For You?

Lauren Nowacki6-minute read

September 18, 2020

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A mortgage is one of the biggest debts you’ll have in your life. And while you may be tackling your credit debt, car loan or student loans, your mortgage may be a little harder to chip away. Did you know there’s a way to make an additional mortgage payment every year? This can be achieved by switching to biweekly mortgage payments, or paying your mortgage twice a month, making half the payment each time. Just by making an extra payment each year, you can pay your mortgage off several years earlier than planned.

Before you hop on the biweekly bandwagon, take a moment to consider if it’s right for you. There are many factors that go into biweekly mortgage payments. It’s important to know what they are and how they can impact your finances before making the switch.

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What Are Biweekly Mortgage Payments?

A biweekly mortgage payment is a mortgage option where, instead of 12 monthly payments every year, you make half a month’s payment every 2 weeks. This method adds an extra month’s payment every year, helping you shave years off your mortgage repayment. In fact, it can help you pay off your mortgage early by 6 – 8 years.

How Do Biweekly Mortgage Payments Work?

Biweekly payments are half of your monthly payment paid every 2 weeks. There are 52 weeks in a year, so this works out to 26 biweekly payments. Since these payments are half the full amount of your monthly mortgage, that equates to 13 full payments.

Biweekly mortgage payments don’t save you money by lowering your interest rate. Instead, they save you money on interest by paying your mortgage down – and off – earlier. When you pay your principal balance down faster, there’s less money to charge interest on, which lowers your interest charge. On top of that, when your mortgage is paid off earlier, it shaves off several years’ worth of interest payments.  

Here’s how it works, using real numbers:

Let’s say you purchase a home for $200,0000 with a 30-year fixed-rate loan. You put down $40,000 (20%) and have an interest rate of 4%. Your monthly mortgage payment is $764, which pays your principal and interest. If you make monthly payments for the life of the loan, by the time your mortgage is paid off, you’ll have paid a total of $274,991 on the loan, thanks to interest.

Let’s say you decide to make biweekly payments instead. With this payment method, you pay $382 (half your monthly payment) every two weeks. If you make biweekly payments for the life of the loan, once your mortgage is paid off, you will have paid a total of $256,288 on the loan.

With biweekly payments, you’ll have total interest savings of $18,703.

Biweekly Vs. Monthly Mortgage Payments

As you can see from the example above, there are a few big differences between biweekly and monthly payments: the number of payments you make, how long it takes to pay off your mortgage and the amount of money you end up paying on the loan.

The number of payments you make each year is the biggest difference because it affects how long and how much you’ll pay. By making an extra payment every year, bi-weekly payments pay off your mortgage faster than monthly payments, which, in turn, saves you more money.

A monthly payment plan allows for 12 full payments each year (one every month). A biweekly plan equates to 13 full payments each year (or 26 biweekly half payments).

Bimonthly mortgage payments could also be an option, but they differ from biweekly payments. That’s because you’re making a payment twice per month, which equates to 24 bimonthly payments, or 12 full payments total – the same amount of payments as the monthly option.

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Pros And Cons Of Biweekly Mortgage Payments

There are a number of benefits if making biweekly payments, but also a number of disadvantages you should consider. Take a look at your finances and consider these pros and cons before deciding which payment option is right for you.

Pros

  • They can help you pay off a mortgage early by several years.
  • They contribute one extra full payment on your principal balance per year and cut down on accumulating interest.
  • Biweekly payments build up your home equity And once you have 20% equity in the home, you can drop your PMI payments, saving you more money each month.
  • This payment plan could make personal budgeting easier, especially if you’re paid biweekly for your job.

Cons

  • The extra payment per year can be tough if you’re on a tight budget already.
  • If you’re living paycheck to paycheck, that extra payment could go to other needs.
  • If you’re used to making monthly payments, you may need to rework your budget and take some time to get used to the new payments.
  • Your mortgage lender may charge a setup fee, as well as transactional fees.
  • If your lender doesn’t offer biweekly mortgage payments, third party payment processors may also charge extra fees.
  • Some lenders or processors still only apply your payments once a month, even though you’re paying twice or more a month, which means you won’t make an extra payment after all.
  • Some mortgage lenders have a prepayment penalty, meaning you could get charged for paying your mortgage off early.

Are Biweekly Mortgage Payments Worth It?

Biweekly payments are a mortgage payment option that can allow you to make an extra full payment each year. This can help you pay off your mortgage earlier and reduce the amount you pay in interest in the long run by thousands of dollars. However, there are things to consider, like how it will affect your finances and whether or not you’ll be charged a fee for setting up this payment method or a fee for paying off your mortgage early. Talk to your lender about whether they offer biweekly payments. If they don’t, you may be able to work with them on making these types of payments a different way to still reap the benefits. One option is to make a smaller, additional payment each month to be applied to the principal only.

If you’re thinking about purchasing a home, use a mortgage calculator to find out how much you can afford and get an estimate of how much your monthly mortgage payment would be. From there, you’ll be able to determine how much a biweekly payment would cost by dividing your monthly payment amount by two.

When it comes to making this important financial decision, it’s best to speak with a financial professional and mortgage lender to have your financial and mortgage questions answered.

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Lauren Nowacki

Lauren Nowacki is a staff writer specializing in personal finance, homeownership and the mortgage industry. She has a B.A. in Communications and has worked as a writer and editor for various publications in Philadelphia, Chicago and Metro Detroit.