Should I sign up for a bi-weekly mortgage payment?

Do bi-weekly mortgage payment programs really allow you to pay off your mortgage early or is this just a scam?

Well, the answer is yes and no. Making bi-weekly mortgage payments will in fact enable you to pay off your mortgage quicker. However, some mortgage companies charge several hundred dollars for setting up this “special” program for you. This is the part that is a bad deal and I’ll show you why.

So what are “bi-weekly” mortgage payments? Basically, instead of paying your mortgage once a month you make a half payment every 2 weeks. So to pick round numbers, suppose you had $1,000 monthly mortgage payment. Instead of paying that, you’d pay $500 every 2 weeks. Simple as that.

Why does this allow you to pay off your mortgage early? Well there are 52 weeks in a year which means you make 26 half payments each year. That’s the equivalent of 13 monthly payments. So really bi-weekly payments are the equivalent of making 1 extra monthly payment each year. And that’s why you pay your mortgage off early. There’s no magic program. This is also why it’s a bad idea to pay to have this setup. You can do this yourself just by making an extra payment each year.

On a 30 year $200,000 mortgage at 5% interest, making bi-weekly payments would allow you to pay off mortgage about 5 years sooner and save about $30,000 in interest. You can find the specifics of your mortgage by using the calculators at Simply click mortgage calculators, select “Bi-weekly payments for an existing mortgage”, and enter the specifics of you mortgage.

Couple of caveats if you want to try this approach:

First, make sure your mortgage does not have any pre-payment penalties.

Second, you want to make sure you clearly specify that any extra payments go against the principle to maximize your interest savings. Watch your statements to make sure your extra payments are applied properly.

If you typically get paid weekly or every other week, I think this is a very good option. If you get paid twice a month or monthly, it might be easier to just save up and make an extra principle only payment as often as you are able.

Bottom line is any plan that enables you to more quickly reduce your debt is a good thing. Just don’t pay extra for a “service” that you can easily do yourself.


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