Bi-Weekly Mortgage Payment Strategy
Bi-weekly mortgage payments involve paying half your monthly payment every two weeks instead of one full payment monthly. This creates 26 half-payments per year (equivalent to 13 full monthly payments) instead of 12, effectively making an extra payment annually. This accelerates principal paydown, saving substantial interest and shortening your loan term.
The math is powerful: on a $300,000 30-year mortgage at 6.5%, bi-weekly payments can save over $60,000 in interest and pay off the loan 4-5 years earlier. The beauty is that each bi-weekly payment is only slightly more than you're already paying (half your monthly payment), making it psychologically easier than committing to a full extra payment.
Before starting bi-weekly payments, check if your lender offers a formal program. Some charge fees or hold the first payment, negating benefits. Alternatively, divide your monthly payment by 12 and add that amount to each payment, achieving the same result without program fees. Ensure all extra amounts go to principal, not just advance your due date.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
You pay half your monthly payment every two weeks (26 times per year). This equals 13 monthly payments annually instead of 12, with the extra payment reducing principal and saving interest.
Some lenders offer formal bi-weekly programs. Otherwise, you can make extra principal payments equivalent to a bi-weekly schedule without special permission. Avoid programs with high fees.
If enrolled in a lender program, check the terms. If you're manually making extra payments, you can stop anytime, though you'll lose the accelerated payoff benefits.
Bi-weekly payments pay down principal slightly faster because you're reducing the balance throughout the year, not just once. However, the difference is small - both strategies are effective.
If your mortgage rate exceeds potential investment returns (accounting for risk and taxes), bi-weekly payments make sense. If you can earn more investing, especially with tax-advantaged accounts, investing may be better.