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Paying your mortgage biweekly is a strategy that can reduce your principal balance faster and cut your total interest costs, allowing you to own your home debt-free sooner. However, it might not be as effective as you think because of how mortgage servicers can handle extra payments.
Here’s what you need to know about biweekly mortgage payments:
- How biweekly mortgage payments work
- Biweekly mortgage payments and your loan terms
- Pros and cons of paying your mortgage biweekly
- How to set up biweekly mortgage payments
- Other ways to reduce your principal balance faster
- Is a biweekly mortgage payment right for me?
How biweekly mortgage payments work
When you pay your mortgage biweekly, you pay half of your monthly principal and interest every two weeks. This means that you’ll make 26 payments per year — the equivalent of 13 monthly payments. So, if you normally make 12 payments of $2,000 each every year, you’d instead switch to making 26 payments of $1,000 each.
If your lender immediately applies each payment, you’ll pay down your principal significantly faster, which means you’ll accumulate less interest.
Some lenders don’t accept partial payments, so your lender might not apply your biweekly payments as you make them. Instead, they’ll apply them once a month.
Biweekly vs. monthly mortgage payments
Paying biweekly can save you thousands of dollars in interest and shorten your loan repayment period by several years.
The table below shows how much time and money you can potentially save by opting for biweekly mortgage payments vs. monthly mortgage payments. The example assumes a mortgage balance of $200,000 with a 30-year term and an APR of 4%.
|Time to pay off||25 years||30 years|
|Total interest you’ll pay||$120,360||$143,739|
|Total interest savings||$23,379||None|
Biweekly mortgage payments and your loan terms
If you took out your mortgage in the last few years, you received a form called the closing disclosure before finalizing your loan. It has two important pieces of information for anyone thinking about biweekly payments.
This section on Page 4 says whether your lender will:
- Accept partial payments that are less than your monthly payment amount and apply them to your loan
- Accept partial payments but hold them until you make the rest of your monthly payment
- Not accept partial payments
Find Out: How to Find the Best Mortgage Lender
This section on Page 1 says whether your lender can charge you a fee for repaying your loan before its scheduled maturity date.
For example, it might say that you could owe up to $3,000 if you pay off the loan during the first two years, which could happen if you refinanced or sold.
Pros and cons of paying your mortgage biweekly
While the potential savings of biweekly payments might be enticing, there are drawbacks that could make this payment strategy less worthwhile to you.
- Save money on interest: The higher your mortgage interest rate, the more you can save by making biweekly payments. Biweekly payments result in an extra payment each year, which reduces your principal amount. That leaves you with a lower balance to pay interest on.
- Pay off your mortgage sooner: If you make biweekly payments from the beginning of a 30-year mortgage, you can pay it off several years sooner. Consider, for example, a new $200,000, 30-year loan with payments that begin in April 2022. With monthly payments, you’d finish paying off the loan in March 2052. By making biweekly payments (applied biweekly), you’d pay off the loan about four years earlier.
- Match your mortgage payments with your work paydays: You may have an easier time managing your monthly cash flow if you closely coordinate your income and expenses. Rather than have one large mortgage payment you have to plan for all month, you’ll make two lower payments that coincide better with your weekly or biweekly paychecks.
- You don’t need to be a disciplined saver: A biweekly mortgage is a set-it-and-forget-it way to pay down your loan. It might take some planning to get started. For instance, your lender may require that you make one advance payment before making the switch. But once that’s done, you won’t have to think about it again.
- Less money for other things: Putting extra money toward your mortgage has an opportunity cost. Directing that cash to paying off high-interest debt or saving for retirement may benefit you more in the long run. In the case of retirement savings, consider this: $100 per month for 30 years equals $36,000 in contributions to your retirement account. At 6% interest, you’d have $100,954 after 30 years.
- Costs extra to get the money back: Yes, you build home equity faster when you make extra principal payments. But if you end up having to re-borrow that money through a home equity loan or cash-out refinance, you’ll set yourself back. Not only will you draw down your equity, but you may pay borrowing fees and a higher interest rate on the new loan. In the end, the fees and interest could cost you more than you stand to save with biweekly payments. You might be better off starting or growing an emergency fund. That way, you can easily access the money if you need it.
- Payments might actually be applied monthly: Mortgage servicers won’t necessarily apply your payments to your account every two weeks. Instead, they’ll often hold the first payment until you make the second payment, then apply both payments together to your full monthly mortgage payment. You’ll pay off your loan ahead of schedule making payments this way, but not as quickly as you would with biweekly acceleration.
- It won’t boost your credit score: Changing your mortgage repayment schedule won’t improve your credit score. Creditors report scores monthly, so all the credit bureaus will see is that you’re current with your payments.
How to set up biweekly mortgage payments
Some mortgage servicers offer their own biweekly mortgage payment plans, giving borrowers a clear way to make more frequent payments. You can also easily handle biweekly payments yourself, which may have added advantages.
Through your mortgage servicer
Check your mortgage servicer’s website for information about biweekly payment options. They may require you to be one month ahead on your mortgage before enrolling in a biweekly payment plan.
On top of that, your loan servicer’s plan may not even apply the payments to your account every two weeks. For example, Caliber Home Loans states that the only benefit of enrolling in a biweekly payment program is that your 13th and 26th payments each year will be applied to your principal balance, reducing what you owe faster.
Handling biweekly payments yourself gives you the most control over the process and is completely free.
When you log in to your mortgage account, your servicer may provide the option to make an extra principal payment as long as you’re current on your mortgage.
Divide your monthly mortgage payment by 26 to get the amount of extra principal you should pay every two weeks. Keep making your monthly mortgage payments in full, as usual.
Managing biweekly payments yourself also allows you to easily switch back to monthly payments at any time without contacting your mortgage servicer.
Other ways to reduce your principal balance faster
Besides making biweekly mortgage payments, there are other strategies you can use to pay down your principal faster.
Refinance to a shorter loan term
Best if: Refinancing will substantially lower your interest rate
Refinancing to a shorter loan term only makes financial sense if your interest rate savings will exceed the closing costs for your new loan. The fewer months it’ll take for you to gain this benefit, the better, but your breakeven point should definitely be sooner than when you expect to sell your home.
If you’re ready to refinance, Credible makes the whole process easy. You can compare multiple lenders and see prequalified refinance rates in as little as three minutes without leaving our platform.
Learn More: How to Refinance Your Mortgage in 6 Easy Steps
Make extra payments every quarter
Best if: Your cash flow is irregular
Biweekly mortgage payments can be logical for people who get a steady paycheck every two weeks. But if you’re a small business owner or independent contractor, your income can vary a lot in the short run.
Making an extra mortgage payment each quarter — instead of every two weeks — might better align your income with your expenses while still allowing you to save on interest and pay off your mortgage sooner.
Make a lump sum payment
Best if: You want to apply a large lump sum to your mortgage principal
Instead of recurring payments, you can make one large payment toward your principal and ask your lender to recast your mortgage. The lender will recalculate your monthly principal and interest payments based on the new, lower principal balance — and you’ll receive a lower monthly payment without having to refinance.
You won’t pay off your mortgage faster, because your loan term will stay the same, and your interest rate will stay the same. But you’ll save money on interest because you owe less principal.
Some lenders require a minimum lump-sum payment amount before they’ll recast a loan. Your lender may also charge a few hundred dollars to recast your mortgage, but refinancing usually costs several thousand dollars.
Learn More: How to Pay Off Your Mortgage Early
Is a biweekly mortgage payment right for me?
Biweekly mortgage payments could save you a lot of money and allow you to own your home debt-free sooner. Consider making biweekly payments if you plan to remain in your home long enough to reap the benefits. Just be sure you have a handle on other debt, maintain a healthy emergency fund, and stay on track with your retirement savings.
If a rigid biweekly plan isn’t the right choice for you, you might opt for an alternative, like making extra payments on your own or refinancing into a shorter-term, lower-rate mortgage loan. You can still save money and pay your mortgage off faster than you would with monthly payments alone.
Daria Uhlig contributed to the reporting for this article.