Biweekly Mortgage Payments

You’ve probably already heard the claims. That a biweekly mortgage can save you thousands of dollars. And that a biweekly mortgage can shave years off the life of your loan and help you accrue equity in your home fast.

Well, it’s true! Pardon the exclamation point. Anyways, “biweekly mortgage payments” are a sort of accelerated mortgage payoff system that allow you to make an extra monthly payment each year. The way it works is rather simple.

Instead of making a single monthly mortgage payment each month, or 12 mortgage payments a year, you make a half mortgage payment every two weeks. And because there are 52 weeks in a year, that equates to 26 half mortgage payments annually, or 13 total monthly mortgage payments.

The result is an additional mortgage payment each year, but of course it’s not that simple. Nothing ever is. You can’t simply expect the bank or mortgage lender to allow you to mail in a half payment twice a month, that simply won’t fly.

Your bank will ask you to set-up a biweekly payment system with an intermediary, which acts as a liaison between you and your lender. But biweekly payment companies can get expensive, especially when they charge a set-up fee of anywhere from $200-$500 and then an additional fee for each transaction.

So what are the benefits of a biweekly mortgage anyways?

- you can increase the amount of equity in your home at a faster rate
- you can save money by paying less interest on your mortgage
- you can reduce the term of your mortgage
- your mortgage payments are automated and made simple
- more frequent payments decrease the outstanding principal loan balance faster

So you like the benefits a biweekly mortgage affords, but it seems somewhat defeatist to pay someone to help you save money on your mortgage right? Right. That’s why there’s an alternative to do it yourself, with a “no cost biweekly mortgage” plan.

No Cost Biweekly Mortgage

Forget that fancy name. Here’s how it works. Instead of having a biweekly mortgage company handle your monthly payment, simply take your typical monthly mortgage payment, divide it by twelve, and add that to your mortgage payment each month. And then send in your increased monthly payment to the bank or lender. That’s it, you’re done.

And this free biweekly mortgage method actually works in your favor for several reasons. First, you don’t pay any extra junk fees to have someone do it for you. And second, because you make an extra payment to principal each month, your loan balance is reduced each month, reducing the total amount of interest due throughout the life of the loan. So you pay less interest in a shorter amount of time. Amazing.

[Pay off mortgage or invest?]

The only drawback to doing it yourself is the old self-discipline issue. Can you trust yourself to make the higher payment each month? Will you remember to do it? Luckily, these days you can set up automated payments within your checking account for free, so it shouldn’t be too much of a problem either way. And you have the benefit of backing out at anytime if your financial situation changes.

You don’t have to nail it down to an exact science either. You can always pay an extra $100, $200, or $300 a month if you’d like. Find a number that works for you and stick to it. Or make extra payments throughout the year based on your income fluctuations. If you’re determined to pay your mortgage off, every little bit helps.  You can even round up your payments.

You don’t need to enroll in a “mortgage acceleration program” or hire a “certified mortgage acceleration specialist” to help you figure out how to make your loan amortize more quickly. It’s really quite simple. Don’t fall for gags that require you to pay an extraneous set-up fee or a transaction fee every time you make a payment. Your goal is to pay less, not more.

One last thing, don’t confuse biweekly mortgages with “bimonthly mortgages.” A bimonthly mortgage, or semi-monthly mortgage involves no extra payments, just two half payments a month that equate to the typical 12 payments a year. In effect, the practice does very little to save money, and isn’t offered by many banks and lenders.

Read more: How to pay off the mortgage early.

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