What are biweekly mortgage payments? A complete guide

What are biweekly mortgage payments?

Biweeekly mortgage payments are when people take their monthly payment, cut it in half and pay half every two weeks instead the full amount once a month. Since there are 52 weeks in a year, this totals 26 half-payments per year, or 13 full payments instead of the regular 12. As long as you confirm with your servicer, the additional payment will apply to your loan’s principal balance, which means you’ll pay off your mortgage sooner and save on interest.

Example of biweekly mortgage payments

Let’s say you buy a $410,000 home with 10 percent down, financed with a 30-year, fixed-rate mortgage at 6.4 percent. Your first mortgage payment would look like this (not including taxes and insurance):

To make this a biweekly payment, you’d simply cut the $2,308 monthly payment in half and pay that amount — $1,154— every two weeks.

At that rate, by the end of the year, you’d have paid $30,004 — $2,308 more than what you would have paid if you had made payments once a month. That extra payment, though, goes entirely toward your principal, adding up to significant savings in interest and a much faster payoff:

You can crunch your own numbers with our biweekly mortgage payment calculator.

Pros and cons of biweekly mortgage payments

Pros

• Long-term savings: With biweekly payments, you’ll save big on interest. For instance, in the example above, you’d save more than $33,000 on interest in the first 10 years alone.
• Faster equity growth: You’ll accumulate more home equity with biweekly payments because you’re making an extra payment every year, which goes directly toward your principal. This can help you land a better rate if you refinance, plus this equity can be converted into cash in the form of a home equity loan or home equity line of credit (HELOC).
• Higher net proceeds: Since you’ll have more equity, you’ll pocket more of the proceeds when you decide to sell.

Cons

• Could slow your other financial goals: A biweekly strategy means you’re putting more of your earnings toward your mortgage. So you’ll need to think about how this could impact your other financial goals, such as saving for retirement or paying off higher-interest debt, like credit cards. You may need to reprioritize.
• Might require extra setup: Lenders want to earn their share of interest, so arranging biweekly payments might not be that simple. Before making the extra payments, contact your servicer to coordinate your payment plan and verify that your additional amount will, in fact, go toward the principal. Keep track of who you spoke with and get confirmation of your conversation in writing.

Alternatives to biweekly mortgage payments

If paying your mortgage biweekly isn’t an option for you, but you still want to pay off your mortgage faster, consider these alternatives:

• Round up monthly payments to the nearest hundred or thousand and pay that amount.
• Use bonuses, tax refunds or other windfalls to make extra payments in a lump sum.
• Make an extra payment at any time during the year.
• Divide your monthly payment by 12 and park that amount in a high-yield savings account each month. Then, at the end of the year, you can send the accumulated amount to your lender as an extra payment that goes solely toward the principal.

How to set up a biweekly mortgage payment plan

Contact your mortgage servicer (this might or might not be your lender — here’s how to check). 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. If your monthly payment is $2,000, for instance, you can send $1,000 biweekly.

To ensure your biweekly mortgage payment plan works the way you want it to, you’ll need to know:

• Whether you have a fixed- or adjustable-rate mortgage (ARM). Extra payments affect fixed-rate mortgages and ARMs differently.
• That your lender or servicer allows biweekly mortgage payments.
• That your extra payments are applied to the loan principal.

Lastly, keep in mind that your total monthly mortgage payment often includes property taxes and homeowners insurance premiums. Make sure that no part of your extra payment is going into your escrow.

What to consider before switching to biweekly mortgage payments

• What does my savings account look like? Paying down debt faster feels good, but it shouldn’t come at the expense of your emergency fund. If your savings need attention, don’t stretch yourself too thin to make biweekly payments.
• What other debts am I paying? If you’re paying off a car, student loans or credit cards, consider the interest rate attached to them. You’re likely better off paying these debts off first before addressing your mortgage.
• What’s my interest rate? The higher your mortgage rate, the more you’ll be able to save with biweekly payments. If you have a low rate, there may be better ways to use your money.
• How long do I plan to stay in the home? If the house isn’t your forever home and you have other financial goals you’re working toward, paying down your mortgage early might not be your highest priority.
• Would I be better off investing the extra cash? Should you save money by eliminating debt, or earn money by finding good investment opportunities? That’s a big question that doesn’t necessarily have an easy answer. Those with a decent risk tolerance — and a long time horizon — might opt for putting money in the stock market. On the other hand, getting rid of mortgage debt frees up your budget and could lower the cost of any future debt you take on.

FAQs

• Do all lenders accept biweekly mortgage payments?

  Most lenders do accept biweekly mortgage payments — or any extra payment, at any frequency. But check with your lender beforehand to make sure.

• Are there potential fees associated with biweekly mortgage payments?

  Usually, there aren’t any fees associated with biweekly payments. Most mortgages do not carry a prepayment penalty, for example, nor do lenders charge an enrollment or sign-up fee.

• Is it possible to switch back from biweekly mortgage payments to monthly mortgage payments?

  Yes. It’s easy to switch back if you manage your own biweekly mortgage payments (either by paying extra each month or by making one additional principal payment at the end of the year). If that’s the case, you could just stop overpaying each month or skip the extra payment.

Additional reporting by Taylor Freitas