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Biweekly mortgage payments can help smooth out your budget and save you money on interest.
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With biweekly mortgage payments, you split your monthly payment in half and pay it every two weeks.
This payment schedule can help you save money on interest and build equity in your home more quickly.
You should consider your goals and talk to your lender before setting up biweekly mortgage payments.
When you take out a mortgage, you’ll be expected to make one payment on the same day each month. But some homeowners switch to biweekly payments to pay less over the life of the loan.
Sarah Sprague Gerber, a CFP® professional and founder of Momentum Financial Planning, says biweekly mortgage payments can help you save money on interest and build equity in your home more quickly. But first you need to check that your lender allows biweekly payments, and that the money you’re paying will go toward the principal.
What are biweekly mortgage payments?
When you make biweekly mortgage payments, you split your monthly payments in half. Instead of making one large payment once a month, you make two smaller payments every other week.
This adds up to one additional payment a year, which can significantly cut down on the interest you pay over the life of the loan. “Biweekly payments also might match up better with your paycheck so that you can more easily match payments to your budgeting process,” Sprague Gerber says.
Biweekly mortgage payment example
Let’s say you got a $400,000 mortgage with a 7% interest rate and 30-year repayment terms. That means your mortgage payments would be $2,661 per month.
If you continue making your payments at this pace, you’ll pay $558,216 in interest by the time the loan is paid off.
Instead, you can make biweekly payments of $1,330.50 every other week. You’ll pay $418,285 in interest and will pay off the loan six years earlier. By making one additional payment per year, you’ll save yourself $139,931 in interest payments.
Paying mortgage biweekly vs. monthly
When most people take out a mortgage, they make one payment on the same day each month. Some people choose to set up autopay so they don’t have to remember to make their mortgage payments.
Another option is to make biweekly payments, where you split your monthly payment in half and pay it every other week. Since some months are longer than others, you end up making one extra full payment per year.
Biweekly payments aren’t as straightforward as monthly payments, but they can save you quite a bit of money in interest over the life of the loan.
“Typically, only one biweekly payment would be the ‘regular’ mortgage payment, and the other you should set to pay off pure principal,” Sprague Gerber says. Here’s how the two arrangements compare:
Biweekly mortgage payments
Monthly mortgage payments
Pay half your mortgage payment every other week13 full payments per year (26 payments total)Helps you pay off your mortgage soonerPay your full mortgage payment once per month12 full payments per yearLoan is paid off once the loan term is up
Pros and cons of paying your mortgage biweekly
Making biweekly payments will save you money on interest and help you pay off your home faster. It will also help you build equity in your home sooner, which has numerous benefits.
However, biweekly payments mean you’ll have less money for other household expenses. And the set up process isn’t quite as easy as making monthly mortgage payments.
You’ll have to contact your lender to ensure they’ll allow biweekly payments and that the additional payment will go toward the principal. You should also ensure you won’t be charged a prepayment penalty for paying off your mortgage early.
Here are some advantages and disadvantages of biweekly mortgage payments:
Pros
Cons
Save money on interestPay off your mortgage soonerBuild equity in your home more quicklyRequires more steps to set up Means you’ll have less money for other expensesPossible prepayment penalty
How it works with an escrow account
While making a biweekly payment to your mortgage would typically include homeowners insurance and taxes — known as an escrow payment — Sprague Gerber says you can manually go in and make a payment that goes exclusively toward the loan principal instead.
“Even if you have to pay escrow in addition to the payment, you can still get money back from the extra or have it applied in advance,” she says. “Although it’s much better to avoid it in the first place if you can.”
How to set up a biweekly mortgage payment
Before making biweekly mortgage payments, think about any other outstanding debt you have. If you’re currently carrying a balance on a credit card, it’s a good idea to pay that debt off first before making extra payments on your mortgage.
Once you’re in a good financial position, you can find out whether your lender allows partial mortgage payments. This information is outlined in the loan terms you signed when you initially took out the mortgage.
From there, you can contact your lender to set up a biweekly mortgage payment. Some lenders make this easy and allow you to enroll on their website.
You want to understand your lender’s policy regarding biweekly payments before you set it up. Here are some questions you can ask your lender:
Will my extra payment be applied toward the principal only?Are there any extra fees I should know about? Are there any prepayment penalties?Will making extra payments inflate my escrow cushion?
If your lender agrees to biweekly payments, it’s a good idea to get this agreement in writing.
Quick tip: Avoid signing up for biweekly mortgage payments through a third-party processing company. These companies often charge an upfront setup fee and monthly fees. If your lender doesn’t offer a biweekly payment option, you can make extra payments yourself.
The bottom line
Biweekly mortgage payments can be a good option for a borrower who wants to save on interest and pay their loan off ahead of schedule. You want to ensure your additional payments are applied toward the principal and that you won’t get hit with a prepayment penalty.
But, Sprague Gerber adds, you should always consider your cash flow and financial situation first. “Can you make these payments, or are there other goals in your life you are saving for?”