Biweekly mortgage payments: Are they a good choice for you?

Important Legal Disclosure:

Any figures, interest rates, loan examples, and market data referenced in this article are hypothetical or aggregated for educational purposes only. They are not intended to reflect current pricing, available terms, or personalized loan options for any consumer. This content does not constitute an advertisement of credit terms, a solicitation or offer to extend credit, or a rate quote under federal or state lending laws. Actual mortgage rates and terms are determined by individual financial qualifications, property characteristics, market conditions, and other factors, and are subject to change without notice.

If you are seeking current, real-time mortgage rate information please refer to the official live rate information and product details published at RocketMortgage.com/rates, where current pricing and various loan terms are made available.

Most mortgages span 15 or 30 years, but you have options to shorten the timeline and reduce the interest you’ll pay. One strategy that can be effective is switching to biweekly payments.

Biweekly payments, paying half your monthly mortgage payment every two weeks instead of one full payment each month, are one way to accomplish this goal. Over time, this approach results in about one extra full payment per year, which means you can reduce the time it takes to pay off your mortgage.

In this guide we’ll break down how biweekly mortgage payments work so you can decide if it aligns with your financial goals.

What are biweekly mortgage payments, and how do they work?

With a typical mortgage payment schedule, you receive a bill once each month and send a payment for the loan’s principal and interest to your lender once each month. When you follow a biweekly payment schedule, you send a mortgage payment to your lender every other week. Typically, the amount you send is equal to half of your required monthly mortgage payment.

Because there are 52 weeks in a year, this results in you making 26 half payments over the course of each year. Each payment is half of a normal monthly payment, so you make the equivalent of 13 monthly payments each year.

The extra payment can help you lower your loan’s principal balance faster and save you money. The amount you save will depend on factors like your loan’s interest rate and the term of your loan. You can use this amortization calculator from Rocket Mortgage® to see how much you’d save by making biweekly payments.

The math behind biweekly mortgage payments

This scenario illustrates how much money you can save by making biweekly mortgage payments.

Ezekiel buys a home using a 30-year FHA mortgage. The home cost $375,000, and he put down a 3% down payment¹, meaning his loan’s starting balance is $363,750. The loan has an interest rate of 5.625% and a monthly principal and interest payment (excluding taxes and insurance) of $2,093.95.

Ezekiel debates between making the typical monthly payment and making biweekly payments of half his required monthly payment, which is $1,046.98. The chart below shows how much money and time he’ll save with biweekly payments.

By making biweekly payments, Ezekiel will pay off his mortgage more than five years ahead of schedule and save nearly $80,000 in interest.

How to set up biweekly mortgage payments

To set up biweekly mortgage payments, the first step is to contact your loan servicer. Each servicer will have a unique process for handling biweekly payments.

Some may make it as simple as going into your online account and setting up the payments there. For example, Rocket Mortgage® makes it simple to set up via your client portal.

Other lenders may have a more involved process, which requires paperwork or paying processing fees to initiate the change in schedule.

Pros and cons of biweekly mortgage payments

Before setting up biweekly mortgage payments, consider the pros and cons to make sure it’s the right choice for your unique situation.

Pros

Some of the advantages of biweekly mortgage payments include:

• Your payoff time could shorten: Biweekly payments result in you making additional payments each year, which will let you pay the loan off ahead of schedule.
• You may pay less interest over the loan’s lifetime: By shortening your loan’s repayment period, you leave less time for interest to accrue on your loan. That means you save money over the life of the loan.
• You can build equity faster: Extra payments help you amortize your loan more quickly, reducing its principal balance and boosting your equity.
• You can budget extra payments around paychecks: If you’re paid biweekly, you can schedule your extra payments to align with your paycheck cycle, which can make budgeting easier.
• You can cancel PMI: With conventional loans, you can cancel PMI once you reach 20% equity in your home. Because biweekly payments help you build equity more quickly, they also help you get out of PMI more quickly.

Cons

Before setting up biweekly payments, consider these drawbacks.

• Your lender could charge payment setup fees: Some lenders charge additional fees if you want to set up biweekly payments. Make sure these fees won’t exceed the savings.
• Extra payments may not be applied to the principal: Some lenders may not immediately apply your extra payments to the principal. You will need to communicate with your lender to ensure the money is properly applied to your loan.
• You could have less money for emergencies: If you put more of your money toward your mortgage, you may have less money set aside for emergencies and will have less wiggle room in your monthly budget for unexpected expenses.
• You may be charged prepayment penalties: Some lenders may charge an early repayment penalty if you pay your mortgage off ahead of schedule, which biweekly payments will do. Usually, these only apply within the first few years of the loan, but be sure to check the fine print.

Beware of third-party processors

You may see offers from third-party companies that claim to help you handle your mortgage or set up biweekly payments. These companies should be avoided.

For one, these companies usually charge a fee that can eat into the savings offered by biweekly payments when you could have set up biweekly payments directly with your lender at a lower cost or for free.

At worst, these companies may be fraudulent and looking to get details about your home or mortgage that they could use for nefarious purposes, such as identity theft. It is best to only communicate about your mortgage directly with your lender.

Alternatives to biweekly mortgage payments

Biweekly mortgage payments are just one option for people looking to pay their loans off ahead of schedule. You should also consider these alternatives.

Bimonthly payments

With a bimonthly payment schedule, you pay your mortgage twice each month rather than once a month. Unlike with a biweekly schedule, you don’t wind up making an additional monthly payment each year, which means you’re not really paying any more each year as compared to a normal monthly schedule. If there are extra fees for paying your mortgage payment this way, the additional charges could reduce or negate any interest savings. Rocket Mortgage doesn’t offer bimonthly payment plans as of this time.

Make one extra monthly payment each year

Rather than making biweekly payments that result in an extra payment each year, you could instead simply make an extra payment once per year. This may be a good option for people who have cyclical income or who typically get a bonus at the end of the year. Put some of that bonus towards your mortgage, and you can pay your loan off more quickly.

Be sure to ask your lender to apply the extra payment directly to the loan principal rather than hold it in escrow to serve as your next monthly payment.

Round up your monthly payment

A simple method to pay your loan off a bit faster is to round your payment up. For example, if your payment is $2,253 a month, round it up to $2,300. The extra amount will go straight toward the principal and help you pay the loan off. This can work well because rounding up your payment usually doesn’t require a lot of extra money, so it can be easy to do without impacting your budget.

Apply windfalls to the loan’s principal

People sometimes receive a financial windfall, such as an unexpected tax return, a bonus at work, or an inheritance. It can be tempting to put this money to use buying something fun or going on vacation, but you can also put some or all of it toward your mortgage.

Depending on the size of the windfall, this can greatly accelerate your progress toward paying off your mortgage.

A rate-and-term refinance

A rate-and-term refinance² allows you to adjust the details of your existing mortgage, replacing its term and giving it a new interest rate.

You could refinance to a mortgage with a shorter repayment term, letting you pay the loan off more quickly. Refinancing can also let you lower your loan’s rate, saving you money on interest.

You can apply for refinancing from most mortgage lenders, including Rocket Mortgage®. This mortgage payoff calculator can help you estimate how much you’d save by adjusting your loan’s term.

The bottom line: Biweekly mortgage payments can be worth it

Biweekly mortgage payments are one strategy that can help you pay your loan off more quickly. By making a payment every other week, you make the equivalent of one extra monthly payment each year, often saving you tens of thousands of dollars and cutting years off of your loan’s repayment schedule.

If you’re looking for ways to save money on your mortgage or to pay it off more quickly, you can reach out to Rocket Mortgage to discuss options that can help you save money.

¹ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

² Refinancing may increase finance charges over the life of the loan.