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Should You Switch to Biweekly Mortgage Payments?
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Most mortgage payments are structured to be paid monthly, but switching to biweekly mortgage payments can reduce how much interest you pay over the life of your loan and even shrink your repayment term. However, simply making payments every two weeks doesn’t guarantee these results — reaping these benefits ultimately depends on how your lender handles biweekly mortgage payments.
Why should you make biweekly mortgage payments?
Making biweekly mortgage payments means paying half of your monthly mortgage payment every two weeks. Instead of making one payment each month, you’ll make 26 half-payments over the course of the year (52 weeks), which translates to 13 monthly payments.
| Monthly | Biweekly | |
| Payment amount | $1,200 | $600 |
| Payments made per year | 12 | 26 |
| Total paid toward mortgage per year | $14,400 | $15,600 |
For example, if you have a $1,200 monthly mortgage payment, you’ll pay $14,400 per year toward your mortgage. When paying 26 payments of $600 each, you will pay $15,600 per year, which equals an extra payment of $1,200 toward your mortgage. It may not sound like much, but, when added up over your loan term, this extra payment can have a substantial effect on your mortgage.
Advantages of biweekly mortgage payments
Biweekly payments can shorten the time it takes to pay off your mortgage. Using the $1,200 mortgage payment example, if you have a 30-year mortgage and you switch to biweekly payments, you will pay an extra $24,000 on your mortgage in the first 20 years. That will not only reduce your loan repayment term, but it will also reduce how much you pay in interest on the loan. Because the principal balance is decreasing at a faster rate than the original loan term, you’ll pay less interest on that amount, saving you money.
With biweekly mortgage payments, you also may find it easier to budget your money, particularly if you are paid every other week. In addition, the more money you pay toward your mortgage principal, the faster you will build home equity that could be leveraged for future expenses or goals.
Disadvantages to biweekly mortgage payments
Although there are several benefits to making biweekly mortgage payments, there are drawbacks to making the switch as well.
Potential prepayment penalties
Your lender may have included a prepayment penalty in your loan agreement stating you have to pay a fee if the mortgage is paid off early. This fee may exceed any savings you receive from switching to biweekly mortgage payments.
Third-party services
If your payments are set up through a third-party service, it may charge you fees to pay biweekly. These fees can cut into the potential savings you’d earn by switching from monthly to biweekly payments.
No impact on credit score
Splitting your mortgage payment into two payments instead of one won’t have much effect on your credit score, because the lender reports on-time or late payments monthly, regardless of whether it’s one payment or two.
Less money for other priorities
While it may not seem like much, applying that extra payment to your mortgage could take away from boosting your retirement savings or paying for other upcoming expenses, such as buying a new car or covering college tuition.
How to set up to biweekly mortgage payments
Before switching from monthly to biweekly mortgage payments, it’s imperative you speak with your lender about how to move forward. The company may not apply either payment to your mortgage until the full monthly payment amount is received.
Things you should know
Your lender can place your partial payment in a special account until the full payment amount is received, according to the Consumer Financial Protection Bureau. Only then is the company required to apply the amount to your loan, negating one of the benefits to making biweekly mortgage payments. In addition, your lender may charge a fee to set up a payment plan or a prepayment penalty for paying off your mortgage early.
If your lender doesn’t charge any fees or penalties, you can move forward with establishing a payment plan for biweekly mortgage payments. To reap the full benefits of such a plan, you need to instruct the lender to apply the extra payments toward your mortgage principal, not the interest. Otherwise, you’re less likely to reduce the interest you pay over the life of the loan or shorten the loan term.
Are biweekly mortgage payments right for me?
Switching to biweekly mortgage payments may not be right for everyone. It’s important to evaluate your financial situation to see if they’re feasible with your payment schedule and budget. It’s also important to determine whether the financial benefits outweigh any potential fees charged by your lender.
Fortunately, there are alternative ways to pay your mortgage faster, including:
→ Paying extra each month. Look at your budget to see if you have extra cash that can be applied to the mortgage principal. Even $50 can help reduce the principal and the total amount of interest you pay on the mortgage.
→ Refinancing and paying the savings. It’s possible to refinance your existing mortgage for a new loan with a lower interest rate and monthly payment. To chip away at your mortgage balance, continue to pay your previous monthly payment and instruct your lender to apply the extra cash to your principal.
→ Rounding up payments. Instead of sending the exact payment amount — say, $1,235.50 — round it up to $1,300 and apply the extra amount to the mortgage principal.
→ Applying bonuses or tax refunds. Any time you receive some extra cash, such as a tax refund or year-end work bonus, apply that money to your principal.
Biweekly mortgage payment FAQs
What is the difference between bimonthly and biweekly mortgage payments?
With bimonthly payments, you make payments twice a month, while biweekly mortgage payments mean you make payments every other week. As such, making bimonthly payments means you only make 24 payments per year, rather than the 26 payments you’d make on a biweekly schedule (over 52 weeks).
What happens if I make biweekly mortgage payments?
Making biweekly mortgage payments could reduce your loan principal faster, meaning you may pay off the mortgage early. It could also reduce how much you pay in interest over the loan’s lifetime.
Do mortgage companies allow biweekly mortgage payments?
Not all mortgage companies allow biweekly mortgage payments, so it’s important to talk with your lender first. For those that do allow biweekly mortgage payments, find out if they charge fees or prepayment penalties.
How do I create my own biweekly mortgage payment plan?
Once you confirm your lender or servicer allows biweekly mortgage payments and doesn’t charge fees or prepayment penalties, calculate your biweekly mortgage payment to ensure you pay the correct amount every two weeks. Additionally, instruct your lender to apply the extra payments to the principal instead of interest.
Where can I find a biweekly mortgage payment calculator?
LendingTree’s mortgage calculator can help. Start by entering your mortgage information and be sure to click on “Advanced Options” and enter the requested amounts. Then scroll down to the “Strategies to reach your payoff day faster” section. Choose “Biweekly” under “Pay more frequently” to see your biweekly payment amount.