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Most homeowners make their mortgage payments once a month. However, you can make smaller payments toward your outstanding balance more frequently if there isn’t a prepayment penalty, which is unlikely. With a biweekly mortgage payment schedule, you can pay off your loan more quickly by making half your regular monthly payment every two weeks.
How do biweekly mortgage payments work?
A typical mortgage payment is due on the first of each month and includes principal and interest repayment as well as extra cash if you’re paying property taxes, homeowners insurance, mortgage insurance, and HOA fees into an escrow account.
The majority of each payment you make as you start repaying your mortgage actually goes to interest; as a result, your lender makes a lot of money while you barely make a dent in the principal.
Imagine you make a 10% down payment and a 30-year mortgage to purchase a $350,000 home tomorrow. Your interest rate is 7%, and your principal amount is $315,000. Your first mortgage payment breakdown would look like this:
Half of that mortgage payment, or $1,047, would be made on a biweekly basis. Each year, there are a total of 26 payments of 50 made every two weeks. At that rate, you would have paid $27,235 by the end of the year, which is $2,095 more than you would have paid if you had made payments once a month. However, that additional payment is applied entirely to your principal, resulting in significant savings and a much faster payoff:
|Interest total||Payoff time|
|Monthly payments||$439,453||30 years|
|Biweekly payments||$327,470||23 years|
Pros and cons of biweekly mortgage payments
How to set up a biweekly mortgage payment plan
Contact the business that services your loan (this may or may not be your lender; see how to verify this). You can simply send half of your mortgage payment every two weeks if your lender accepts biweekly payments and applies the extra funds to your principal. For instance, if your monthly payment is $2,000, you can send $1,000 biweekly.
Alternatively, you can multiply your monthly payment by 12 and set aside that sum each month in a savings account. At the end of the year, you can send your lender the total amount as an additional payment that will only be applied to the principal.
Check the following to ensure your biweekly mortgage payment schedule is operating as intended:
Last but not least, remember that your monthly payment includes homeowners insurance and property taxes. Therefore, be sure to ask your lender if these payments would increase your escrow cushion.
Are biweekly mortgage payments right for me?
Making biweekly mortgage payments properly results in less interest being paid over the course of your loan, saving you money and allowing you to pay off your balance more quickly. However, you need to make sure that the additional payments are going toward the principal and check to see if there are any prepayment penalties.
Also keep in mind that, in some cases, paying off your mortgage faster means that you will have to divert funds from other financial obligations. Examine your goals and budget in great detail prior to deciding to make payments every two weeks.