7 Min Read | Published: August 5, 2024
A Guide to Biweekly Mortgage Payments
There are benefits and drawbacks to biweekly mortgage payments. See whether biweekly payments make sense for you, and alternatives to consider.
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
At-A-Glance
Many banks and mortgage lenders offer a biweekly payment option, which could help homeowners build equity faster and pay off their mortgage sooner.
Paying your mortgage biweekly could help you pay it off sooner, but it requires strict budgeting and a commitment to managing your spending.
You’ll also want to check with your bank to see whether the extra payments are going to the principal, and if there are any prepayment penalties for paying your mortgage off early.
Paying off your mortgage early can be a notable goal for many homeowners. One way to accomplish this is to increase the frequency of your payments by switching to a biweekly payment schedule. This may be able to help you pay off your mortgage faster, and save on interest over time, but there are some important considerations to keep in mind. In this article, we’ll explain how biweekly mortgage payments work and help you decide if biweekly payments are the right choice for you.
How Do Mortgage Payments Work?
A mortgage is a long-term loan used specifically to buy a house. Two terms mortgage holders should be familiar with are “Annual Percentage Rate (APR)” and “amortization schedule.” The APR includes the mortgage interest rate, fees, and closing costs. It’s expressed as a percentage. Amortization schedules show how much of each monthly payment is applied to the loan principle and how much goes to interest, and this ratio changes over time.
Monthly mortgage payments made early in the loan period mostly go to interest. As the years pass, more of each payment is applied to the mortgage loan principle. You can also make additional “principle only” payments in addition to your regular monthly mortgage payment to reduce the balance faster.
What Are Biweekly Mortgage Payments?
The default repayment frequency for mortgage payments is monthly. Most mortgage lenders also offer a biweekly repayment option and an option to pay twice a month. Those are not the same. Paying twice a month only splits your regular monthly payment in half. Biweekly mortgage payments, on the other hand, are made every two weeks, twenty-six times a year.
Biweekly mortgage payments add an extra monthly payment per year to your loan repayment plan. This means you’d be making 13 monthly payments per year, instead of the typical 12.
Effectively, this could reduce the loan term on your mortgage and help you build equity more quickly in your home. It can also reduce the total interest that you’ll have to pay on the loan because you’ll be paying the balance off sooner.
How Much Could You Save With Biweekly Mortgage Payments?
The biggest difference between biweekly and monthly mortgage payments is the money you can save in interest payments with the biweekly option.
According to an example given by Rocket Mortgage, let’s say that you have a 30-year mortgage on a $200,000 home, with a 4% fixed interest rate, and you’ve made a $40,000 downpayment. In this example, your monthly mortgage payment could be $764. If you’re making monthly payments, you’ll end up paying a total of $274,991 on the loan, due to interest. However, if you make biweekly payments of $328, you’ll have paid a total of $256,288 on the loan, and will pay it off in 25 years instead of 30.1
Pros and Cons of Biweekly Mortgage Payments
There are some advantages to making biweekly vs. monthly mortgage payments, but there are also some disadvantages. Here’s a general breakdown of the pros and cons:
Pros of Biweekly Mortgage Payments
- You can save on the total interest you pay on the loan.
- More frequent payments means you can build equity faster.
- You can repay the loan faster with a biweekly repayment plan.
Cons of Biweekly Mortgage Payments
- There’s a potential financial strain to setting up more frequent payments.
- The setup process with your bank may be challenging.
- Some mortgage lenders charge an early repayment penalty.
How to Change to Biweekly Mortgage Payments
The option to change to a biweekly repayment plan may be located on your mortgage lender’s client portal. Look for an “autopay” option. There should be selections there for monthly, twice-a-month, and biweekly payments. Choose the one that fits your needs and enter your bank routing and account number. Your payments will be taken automatically.
Call the mortgage lender if you can’t find a biweekly payment option online. They should be able to walk you through how to set it up. Just make sure you review your budget before putting the payments on autopay to ensure you have the funds to cover them.
Biweekly vs. Monthly Payments: Which Option Is Best for You?
Biweekly payments could help you pay off your loan sooner, but they’re not for everyone. Check your finances by reviewing your budget. You’ll also want to look at your goals. If you plan on selling the house soon, you may not want to change your repayment plan. If you’re building wealth, those extra payments are a good idea. The choice depends on your circumstances.
Another thing to consider here is that you’re not “locked in” to biweekly payments if you choose them. You can always switch back to monthly payments if your finances become unmanageable. You can also do cash-out refinancing if you need liquidity.
Alternatives to Biweekly Mortgage Payments
If you’re on the fence about biweekly mortgage payments, but like the idea of paying you’re your mortgage faster, here are some alternatives:
- Round Up Monthly Payments
Consider rounding up your monthly payments.
- Apply Extra Funds
Apply extra money, including bonuses, to your mortgage.
- Make an Extra Payment Annually
Making an extra payment towards the principal at any point during the year would have the same impact as biweekly payments.
Frequently Asked Questions
A monthly payment plan calls for twelve payments per year. A biweekly plan requires twenty-six payments per year because you pay every two weeks. That means you’re adding the equivalent of an additional monthly payment each year.2
Check if your lender permits biweekly payments in the first place. It’s also smart to see whether there are any prepayment fees. You’ll also want to assess whether your budget can handle biweekly payments.
You may be able to make biweekly mortgage payments on an adjustable-rate mortgage, but keep in mind that your payment will change when the rate adjusts.
The Takeaway
There are pros and cons to switching from a monthly mortgage payment to a biweekly payment. Saving money by paying less interest is at the top of the list, followed by building equity faster. Review your budget and goals before you decide which repayment method fits your needs.
1 “Biweekly Mortgage Payments: Are They A Good Choice For You?,” Rocket Mortgage
2 “Biweekly Vs. Monthly Mortgage Payments,” Rocket Mortgage
Kevin D. Flynn is a financial services provider, business coach, and financial writer. He lives in Leominster, Massachusetts, with his wife Evelyn, two cats, and ten wonderful grandchildren.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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