What Is a Biweekly Mortgage Payment?

Biweekly mortgages are a way to reduce up to 1/3 of the amount of mortgage interest you pay over the lifetime of a mortgage loan. These biweekly systems operate through direct deposit and require that you make 26 half payments a year rather than 12 full payments. The difference is applied to principal.

Advantages of the Biweekly Mortgage

Understand that the interest cost savings is substantial. A 30-year biweekly mortgage will usually result in a person paying off the mortgage in about 22 years. The biweekly payment date is not a date but a day of the week.
The extra two payments each year come in each of the two months every year when the day of the biweekly payment occurs three times, such as when there are three Fridays in a month.

Costs of Using a Biweekly Mortgage

Read your mortgage contract carefully. Biweekly mortgage programs cannot be added on after the mortgage is created. In addition, biweekly plans are usually charged an upfront fee of several hundred to $1,000. There may also be monthly maintenance fees of approximately $4 to $9 per month. If you intend to only live in the house for a few years, biweekly plans may prove to be expensive for you.

How Biweekly Mortgage Plans Work

Biweekly plans means you make the equivalent of 13, rather than 12, monthly payments by having you make 26 half payments. The additional one month of payments goes directly towards the reduction of principal. You do not benefit from the early payment of each semi-monthly statement. Those monies go to the benefit of the mortgage trustee who gets free use of the float. Ask your mortgage broker if it is possible to make voluntary reductions of principal rather than use a biweekly mortgage program.

Alternatives to the Biweekly Mortgage

See under what conditions prepayments are allowed. If you are a reasonable, disciplined saver it may be possible to make voluntary prepayments with your normal monthly mortgage payments and avoid the mandatory schedule. The reduction of the mortgage principal will still be the same.

Study the Alternatives Available to You

All you need to do is make the equivalent of one extra monthly mortgage payment per year to get the same advantage of a biweekly mortgage payment. Whether you make a lump sum payment or add additional monies to your monthly check, the effect is the same. If you are disciplined about your money, you don't have to make extra mandatory payments with a biweekly mortgage when you can achieve the same result with voluntary payments.

Mortgage Reduction Is About Being a Good Saver

If you anticipate the ability to grow your income over the next several years, consider a 15-year mortgage program. The savings are even greater. Use the mortgage calculator under "Resources" to find payment plans to consider. Do not use third parties to assist you in making biweekly payments. You are paying them for doing little but to hold your money and advantage themselves of the free float. In the end, the issue is how good a saver you can become. The faster and more you can save the wealthier you will be.