What Is a Bi-Monthly Mortgage?
A bi-monthly mortgage is a mortgage with a payment due twice per month. A bi-monthly mortgage is different from a bi-weekly mortgage, which has payments due every two weeks. A bi-monthly mortgage will reduce your loan principal marginally more quickly than a regular monthly mortgage.
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Bi-monthly versus Bi-weekly Payments
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Bi-monthly is also called semi-monthly. A bi-monthly payment is twice per month. Instead of 12 payments per year, you would make 24 payments per year. A bi-weekly payment is every two weeks, which is 26 payments per year.
Payment Breakdown
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If you have a bi-monthly mortgage, your mortgage payment is due twice per month, on specific dates. The amount you would have paid monthly is divided by two, and the result is your bi-monthly payment. For example, if your mortgage payment is $1,200 per month, your bi-monthly payment would be $600 twice per month.
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Interest Reduction
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Bi-monthly payments do not reduce interest much, because you do pay the same amount every month as you would with a monthly payment. Bi-monthly payments do reduce interest negligibly, because by paying twice per month, you slightly reduce the principal before the interest accrues. A bi-weekly payment, which is every two weeks, reduces principal faster because bi-weekly payments provide two extra payments per year. As a result, you pay less in interest.
Pros and Cons of a Bi-monthly Mortgage
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A bi-monthly mortgage payment may not work for everyone; if you receive your paycheck on a monthly basis, you may prefer to pay the mortgage in one payment. If you receive your paycheck twice per month or every two weeks, the bi-monthly mortgage may be better because it spreads out the amount due every month. If you have a lot of bills due at the beginning of the month, a bi-monthly mortgage payment can lessen the load.
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