Biweekly vs Monthly Mortgage: A Comprehensive Comparison

Did you know that making just one extra mortgage payment per year can significantly reduce the time it takes to pay off your home? In this guide, we’ll help you understand the difference between biweekly and monthly mortgage payments, calculate potential savings, and provide DIY options for making extra payments.

The Math Behind Biweekly Payments

Twenty-six half-payments equal thirteen full payments. While the payment calendar offers some benefits, the main advantage comes from the additional principal payments made each year.

Pros and Cons of Biweekly vs Monthly Payments

DIY Extra Payment Options

There are several ways to make extra mortgage payments without enrolling in a formal biweekly plan:

• 1/12 Rule: Divide your monthly payment by 12 and make that amount every month.
• Annual Lump Sum: Make one extra payment of a full mortgage payment each year.
• Rounding Up: Round up your monthly payment to the nearest even number and pay that amount each month.

These options offer flexibility, particularly during lean months when you may need to adjust your budget.

Decision Checklist

Before making the switch to a biweekly mortgage or adding extra payments, consider factors such as your current budget, financial goals, and the potential for fluctuations in income. Remember that maintaining flexibility during lean months is crucial, which is why DIY extra payment options like the 1/12 rule, annual lump sum, and rounding up can be beneficial.

Consider it if...

• You have a high mortgage rate
• Paying off your home quickly is a priority
• You are debt-free and seeking additional savings opportunities
• You have high-interest debt but want to pay off your home sooner

Skip it if...

• Your mortgage rate is low
• Paying off your home quickly isn’t a priority
• You have high-interest debt that needs immediate attention
• You don’t have an emergency fund to cover unexpected expenses

Caveat

Note that servicer rules may apply, so be sure to review your mortgage terms and check with your lender before making any changes to your payment schedule.

What is the difference between a biweekly and monthly mortgage payment?

Biweekly mortgage payments are half of a regular monthly payment made every two weeks, while monthly payments are made once a month. This results in an extra payment per year for biweekly payers, reducing the overall loan term and total interest paid.

How many biweekly payments equal one full year?

26 half-payments (biweekly) equal 13 full payments in a year. This additional payment each year significantly reduces the mortgage term and saves on interest over time.

Does switching to a biweekly payment plan always result in faster loan payoff and lower interest costs?

While biweekly payments can lead to faster loan payoff and lower interest costs, these benefits depend on factors such as mortgage rate, servicer rules, and your personal financial situation. Be sure to review your servicer's specific guidelines and consider the potential trade-offs before making a decision.

What are some extra payment options I can use to make faster progress with my monthly mortgage?

1. The 1/12 rule: Make an additional full payment every month, equivalent to one twelfth of your regular monthly payment.

2. Annual lump sum: Pay an extra amount once a year, equal to 12 monthly payments.

3. Rounding up: Round up your mortgage payment to the nearest even hundred or thousand dollars, and make that higher amount as your regular payment. This method preserves flexibility in lean months while still providing some interest savings.

Are there any setup fees or per-transaction fees associated with making extra mortgage payments?

Depending on your servicer, you may be charged a fee for setting up an additional payment plan or for each transaction made. Be sure to review your servicer's guidelines and consider these costs when deciding whether to make extra payments.

How does my lender hold half-payments in a biweekly mortgage setup?

Typically, your lender will apply the extra half-payment towards principal when it falls due, such as at the end of the month or in the next billing cycle. This ensures that you receive the benefits of additional principal reduction over time while still maintaining flexible cash flow.