How to Change Mortgage to Biweekly

A mortgage costs the average homeowner tens of thousands of dollars in interest over the life of the loan. Although most homeowners make one payment each month, some pay biweekly, making a half-payment every two weeks. There are 52 weeks in a year, so a biweekly payment plan results in 26 half-payments per year, or 13 full payments. It's this equivalent of an extra monthly payment that saves the homeowner money. In fact, if you start a biweekly plan at the onset of your loan term, you'll pay off your loan in approximately 22 to 24 years rather than 30, according to Bankrate.com, although you can save money even if you're already years into an exiisting loan. Changing your current mortgage to a biweekly payment plan is a fairly straightforward process.

Instructions

1. Contact your lender to request a change in your contract that would allow you to make a half-payment every two weeks.

2. Request your lender's permission and instructions for voluntary biweekly payments if the lender won't grant you a contractual biweekly arrangement.

3. Open a savings or interest-earning checking account specifically for your mortgage payments if the lender won't allow you to pay biweekly. Deposit half a mortgage payment into your account every two weeks and pay your mortgage from that account each month. Note on your payment coupons that any amount over your minimum payment is an additional principal payment.

4. Budget an additional monthly payment each year to avoid maintaining a separate bank account. Send in the additional payment with your first or last mortgage payment of the year. Note on your payment coupon that the lender should apply the extra amount to your principal.

5. Divide your current payment by 12 to arrive at the additional amount you'll need to pay monthly to make an extra payment each year, as an alternative to paying a large lump sum. Add the additional amount to each monthly mortgage payment. Note on each payment coupon that the extra amount is an additional principal payment.

Tips & Warnings

• Even if your lender accepts biweekly payments, it likely applies your payments just once per month. This means it holds your mid-month payment without paying you interest. Paying your mortgage from your own account that you fund biweekly allows you to keep that interest.

• Some lenders charge high fees to convert a mortgage contract to one that allows biweekly payments, and they may charge an additional fee for each payment they process.

• Avoid third-party companies that promise to save you money by circumventing your current repayment agreement with your lender. There is no service they can provide for a fee that you can't do yourself for free.

• Not all mortgages allow early repayment. Contact your lender or read your promissory note to find out what rules apply to your loan.

References

• Bankrate.com; Do You Really Want to Pay Your Mortgage Biweekly?; Dana Dratch; September 2001
• Mass.gov; Consumer Affairs and Business Regulation; Bi-Weekly Mortgage Payment Programs; Division of Banks; December 2001
• ING: What Advantage Does a Biweekly Mortgage Offer?
• Money Track; Does Switching to Bi-Weekly Mortgage Payments Really Save You Money?; December 2010