Biweekly Payments

As you know, a typical mortgage payment is due once a month, so you will pay 12 monthly payments in a year. Biweekly payments split your monthly payment in half, and you pay half a payment every other week. 

Wait, isn't that the same thing? Almost.

Since there are 52 weeks in a year, and you are making a 1/2 payment every other week, you really end up making 26 half payments, or 13 whole payments. So you are essentially paying one extra mortgage payment each year. Every penny of that extra payment, your escrow portion and all, goes towards your mortgage's principal balance!

This allows a 30 year mortgage to be paid off within roughly 24 years, all while keeping most budgets virtually unaffected - and in fact often enhanced.

Making a biweekly mortgage payment, versus a standard monthly payment, is one of the most popular ways to affordably pay down your mortgage balance in a much shorter amount of time. They work especially well for people who get paid every other week, because it lines up perfectly with their paychecks.

Let's take a look at the numbers:

Just for an example, lets use a 30 year fixed $200,000 loan at 5% interest, along with $350 for escrow (taxes and insurance). A mortgage at these terms would have a principal and interest payment of $1,073.64, a total payment of $1,423.64 with escrow, and you would pay a grand total of $386,510.40 over the course of 30 years in principal and interest payments.

By splitting the $1,423.64 in half, and paying $711.50 every other week, you will pay your home off in 24 years for a grand total of $343,480.32 in principal and interest. This generates a savings of six years of payments and $38,809.74 in interest that you would end up paying to your lender!

Very few loan servicers offer in-house biweekly payments. Remember, they make money from collecting interest from you, so collecting less interest, over less time is bad for business! 

The easiest way to get your biweekly payments started is to sign up with a company that handles the entire process for you. Typically all they need is a mortgage statement and a cancelled check or routing information for whichever account you pay your mortgage. From there your biweekly payment is auto-drafted from your checking account and your mortgage savings are automatic!

Nothing is free in this world, and no one provides a service at no cost. Biweekly payment companies typically charge a small fee for processing your payments. However, they often come with additional features like identity theft prevention, legal, and tax programs. When the pencil meets the paper, it's an extremely small price to pay for a $40,000+ return and payment automation.

Click below to learn more about how biweekly payments can save you thousands on interest and help you pay your home off faster!