If you own a home, one of these regular payments is likely for your mortgage. By default, mortgage loans are repaid in 12 equal payments throughout the year, for the duration of your loan term. However, by making a small change in how and when you make those loan payments, you can reduce the total interest paid and satisfy your mortgage debt faster than planned.
Mortgage loans are typically set up the same way. You will make this payment once a month every month until the loan is satisfied, for 12 equal payments a year. Interest on mortgage loans is typically calculated on a monthly basis. This means that the lower your principal balance, the lower the interest charged will be. These savings will add up month after month, not only reducing your total mortgage interest , but also paying off your loan sooner.
So, just how much sooner would you pay off a mortgage with biweekly payments, versus standard monthly payments? At the end of the year, that actually equates to 13 full monthly payments … versus the 12 you would have made with your standard repayment schedule. Think of all the things you could do being mortgage-free for nearly 5 extra years! With a 4. In addition to the 4. Most homeowners recognize the benefit of making extra mortgage payments. However, it can be difficult to actually find the funds to do so over the course of the year.
By scheduling biweekly payments, you can make this process easier on the budget. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
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The information on this site does not modify any insurance policy terms in any way. Most homeowners make their mortgage payments once a month. With a biweekly mortgage payment plan, you can make half your normal monthly payment every two weeks, helping to pay down your mortgage faster. Another reason to make that extra payment is to build equity faster.
In addition to checking whether your lender allows them, consider these disadvantages:. Before you commit to making biweekly mortgage payments, consider whether doing so would benefit your overall financial plan.
A biweekly plan means putting more money toward your mortgage every year, which could pull from other financial obligations like saving for retirement or paying off high-interest debt.
Be sure to work a biweekly payment plan into your budget and see if the savings outweigh any losses elsewhere. Although not common, some mortgages come with a prepayment penalty that lenders charge if a borrower pays off the loan sooner than the repayment schedule dictates.
Beware — these companies can charge a hefty fee for setting up the plan, along with additional monthly payments, both of which can chip away at your savings. They might even charge you for their services and end up sending payments on a monthly basis anyway, which would cost you even more.
If your lender allows biweekly payments and applies the extra payments directly to your principal, you can simply send half your mortgage payment every two weeks. You can also divide your monthly payment by 12 and park that amount in a savings account each month, then send the accumulated amount to your lender as an extra payment at the end of the year. Otherwise, your lender might return the extra amount or forward it to your next payment, which negates the goal of biweekly payments.
In addition, make sure your lender confirms any extra payments are being applied to the principal in a timely manner. Lastly, keep in mind your monthly payment includes property taxes and homeowners insurance, so make sure to ask your lender if these payments would inflate your escrow cushion. If done right, making biweekly mortgage payments leads to less interest paid over the life of your loan, saving you money and paying your balance down sooner.
Also, watch out for any fees or third-party offers. Before you commit to biweekly payments, take a thorough look at your budget and goals. Debt Management. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Mortgage. Table of Contents Expand. Building Better Credit. How the Math Works. The Bottom Line. Key Takeaways Many biweekly payment programs offered by lenders are not necessarily the best financial choice for homeowners.
Committing to biweekly mortgage payments may not be affordable on a tight budget. Biweekly mortgage payments may not necessarily improve your credit score. Making additional payments towards the principal of your mortgage is another way to reduce your interest payments over the life of the loan.
Related Articles. Partner Links. Related Terms Bi-weekly Mortgage A bi-weekly mortgage is a mortgage product which requires the borrower to make payments every two weeks rather than once a month. What Is Forbearance?
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