Should You Pay Your Mortgage Biweekly?


Susan Kelly

Mar 13, 2022

Biweekly payment programs may be an alternative to regular monthly payment plans for homeowners with conventional mortgages, but you may not be aware of this option.

Some lenders say you might save money by making biweekly mortgage payments instead of monthly installments. According to popular wisdom over the life of a 30- or 15-year mortgage, increasing the frequency of your expenses can save you years of interest.

What Is a Biweekly Mortgage?

Monthly payments are the norm, as they are due on the same day every month. It is possible to pay half of your monthly principal and interest payments bimonthly. That's the equivalent of 13 total payments each year instead of 12 or 26 half-payments.

Here's a different perspective. Every $100,000 you borrow for 30 years at a 4% interest rate will cost you $477.42 per year in mortgage payments.

Increasing Your Credit Score

Although some people assume that paying their bills every two weeks helps their credit, experts say this is a misconception. Regularly paying your mortgage loan on time is made easier with an automated withdrawal schedule set up by the mortgage provider.

The on-time payments that come from an automated payment plan will increase your credit rating, but you may also obtain the same benefit from an automatic monthly payment if you forget to send the check.

Does It Reduce Your Loan's Interest?

No biweekly payments are sent to the firm that holds your loan, even though you are paying twice every month. That money is probably sitting in an account until the month's conclusion However; does this imply that the rising tide of interest will not be lowered?

Each calendar year contains 52 weeks, and since each month has four weeks, that means there are 48 weeks in the calendar year. So, instead of two payments each month, biweekly payments will be divided into 26 equal installments or 13 monthly payments per year.

Is a Biweekly Mortgage Payment for Me?

Now that you're aware of the advantages and disadvantages of making biweekly mortgage payments, you're better equipped to decide if it's right for you.

· Consider Your Debts

Let's imagine your mortgage has a 4% interest rate, and you also have a 2% vehicle loan, a 6% college loan, and a 16% credit card.

Paying down your house (or vehicle loan) will save you less than paying down your student loan or credit card, which has higher interest rates. Financially speaking, it may be more advantageous to pay off such loans sooner than later.

· Check Your Emergency Fund

There is no sense in paying off your mortgage early unless you have enough money set up for unforeseen costs to last at least six months.

You don't want to be caught off guard and forced to take out a loan to cover an unexpected need after you've already paid off your mortgage with your additional funds.

· Verify the Conditions of Your Loan

If your lender accepts partial payments, it should be included in the mortgage documentation you signed when you took out your house loan. Specific lenders may not obtain them, while others may retain them until you send in enough for complete payment.

You'll need a different technique if your lender decides to manage your income in this way. Prepayment penalties might also be an issue to keep in mind. Look over your loan documents or contact your mortgage servicer to see if you are affected by this new rule (and get the answer in writing).

Downsides of Biweekly Mortgages

Biweekly mortgage payments might save you money, but they aren't all good news for your wallet either. Consider the following drawbacks in addition to seeing if your lender permits them:

· Savings for other needs

Consider whether making your mortgage payment every two weeks will help your entire financial plan before committing.

A biweekly payment plan implies that you'll be spending more money toward your mortgage each year, affecting other financial commitments like saving for retirement or paying off high-interest debt. To discover if the benefits of a biweekly payment plan exceed the costs, include it in your budget.

DIY offers founder and President Connie Heintz to warn that paying the extra amount "means that a piece of your monthly money is held up elsewhere. This may impair your budget and capacity to pay for other critical financial demands than your mortgage."

· Prepayment penalty

A prepayment penalty may be imposed on some mortgages. However, this is not a typical feature. Lenders can assess prepayment penalties in various methods, such as charging 2% to 4% of the outstanding debt or a flat cost of $3,000 or more. Prepayment penalties may be imposed if you don't read your loan documentation carefully or contact your lender.

· Third-party payment plans

The third-party provider may offer biweekly payment plans if your lender does not. Forewarning: These firms might demand steep setup fees and subsequent monthly charges that can eat into your funds.

Even if they don't charge you for their services, they may wind up charging you a monthly fee, which would add up to a lot of money.


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