How Does a Biweekly Mortgage Payment Company Really Work?

Bi-weekly mortgage programs.

Biweekly mortgage payment companies reduce the time it takes to pay off your mortgage by increasing the amount you pay the mortgage company. If you can handle the payments and you qualify, you can pay your loan off faster by getting a 15 or 20-year term loan.

Set-Up

The biweekly company's program works best when your payday is every week or every other week. It is not as effective if your payday is once or twice a month. The program requires you to pay half of your regular monthly payment every two weeks. This is more difficult to accomplish if your payday is once or twice a month. The easiest way to pay bi-weekly is to have the payments deducted from your pay check.

Advantage

There are 52 weeks in a year and you pay every two weeks. That means you are paying half a mortgage payment 26 times a year. This is the same as 13 full payments a year. That is one extra payment per year compared to 12 regular monthly payments. The extra payment every year means your loan is paid much sooner than paying it 12 times per year.

Do-It-Yourself

The bi-weekly company charges a fee to you for this service. You can achieve the same results by making one extra mortgage payment every year. If you have the discipline to make the extra payment, you can make the payments directly to your mortgage company. You do not need a company to set this up.

Alternatives

If you do not receive your pay weekly or bi-weekly, you can still dramatically reduce the term of your loan by paying an extra 10 percent of your normal monthly payment or more each month. The more you pay, the faster you will pay off your loan. Paying bi-weekly is the same as paying about 8 percent extra each month.