Biweekly Mortgage Payments: Explained

Most people make their mortgage payments once a month, per their lender’s payment plan. But if you’re looking for ways to save on interest and pay down your mortgage faster, you might want to try biweekly mortgage payments. Before getting started, take some time to learn how this payment strategy works and how it can affect your budget.

What Are Biweekly Mortgage Payments?

When you make biweekly mortgage payments, you pay half of your monthly mortgage payment every 2 weeks of the year instead of once a month for 12 months.

Biweekly payments are an alternative method to making one large mortgage payment each month. Borrowers who choose this method do it because it can help them pay off their home loan earlier.

How Do Biweekly Mortgage Payments Work?

There are 12 months in a year. When you pay once per month, you make 12 full payments per year.

There are 52 weeks in a year. When you make biweekly mortgage payments, you make a half payment every other week, equating to 26 half payments per year. That equates to 13 full mortgage payments paid throughout the year.

That means a biweekly payment plan adds one extra full mortgage payment to the calendar year.

A biweekly payment is also a good strategy for homeowners who are looking for ways to pay down the principal balance on their mortgage. Lowering the principal balance will save you money on interest charges over the life of the loan. It can also help you get to 20% equity faster, which can help you remove private mortgage insurance (PMI) faster, if you have it.

How To Calculate Biweekly Mortgage Payments

To calculate your biweekly mortgage payments, you’ll need to know your monthly mortgage payment. If you already have a monthly payment, simply divide it in half.

If you’re in the process of getting a mortgage or planning on getting one in the near future, you’ll need to consider the home’s purchase price, the down payment amount, the length of the loan term and the mortgage interest rate. This will help you determine what your monthly and bimonthly mortgage payments will be. You can also use the Rocket Homes℠ mortgage calculator to estimate your monthly loan payment.

You can also use an amortization calculator or biweekly payment calculator to see how much you’ll save in interest by making biweekly payments.

For instance, let’s say you purchase a $300,000 home with a 30-year fixed rate term and 5.5% annual interest rate. Your monthly payment amount is about $1,703 and you’ll pay $313,212 in interest charges over the life of the loan.

In comparison, your biweekly mortgage payment is about $851 and you’ll end up paying $248,820 in interest over the life of the loan. That means biweekly payments will end up saving you $64,392 in interest payments.

How To Set Up Biweekly Mortgage Payments

Speak with your mortgage lender first to see if they allow these payments. Rocket Mortgage® customers can set up biweekly payments online.

You can also make biweekly mortgage payments directly instead of signing up for an official payment method with your lender. Whatever payment strategy you choose, do your research first. And you should avoid third-party providers that charge a fee for processing a new payment plan.

Pros And Cons Of Biweekly Mortgage Payments

Depending on your goals as a homeowner, biweekly mortgage payments could make sense. But there are some pros and cons you should consider before switching payment plans.

Pros

• Pay off your mortgage faster: When you make biweekly mortgage payments, you’ll end up making one extra full payment per year. That means you’ll pay off your loan faster, with very little extra effort on your part.
• Pay less in interest over time: By making biweekly payments, you’ll pay down the principal faster and can save thousands of dollars in interest over the life of the loan.
• Budgeting may be easier if your payroll is biweekly: Many people get paid every 2 weeks, so matching your biweekly payments to your payment schedule can make budgeting easier.

Cons

• More frequent mortgage payments aren’t always ideal: Switching to biweekly payments requires an ongoing commitment, and you can’t change your payment strategy from month to month. You should consider whether you’ll be able to stick to this method over time.
• Less money may be available for other expenses: Making biweekly payments means you’ll make one additional mortgage payment per year. That’s less money that you’ll have to put toward other expenses.
• Lenders might not offer or allow a biweekly payment plan: Some lenders don’t offer biweekly payment plans. And other lenders will hold your first payment of the month until they receive the second. That means you’re making biweekly payments without reaping the benefits.

Alternatives To A Biweekly Mortgage Payment Schedule

Maybe you want to pay off your mortgage early but aren’t sure if biweekly payments are the right choice for you. If so, here are some alternative methods you can consider:

• Rate-and-term refinance: Some homeowners opt for a rate-and-term mortgage refinance, which can help them get a better interest rate and loan term based on the existing home loan.
• Apply your third paycheck to the mortgage: Most people have a couple months throughout the year when they receive three payments instead of two. Instead of spending it, you could commit to applying it to your mortgage.
• Make one extra payment a year: Instead of doing biweekly payments, you can also consider just making one extra payment a year. You’ll have to budget and plan for this, but some people may find it easier than doing multiple payments per month.

Is A Biweekly Mortgage Payment Plan Right For You?

Maybe. But before taking on this payment plan, you should consider the following variables:

• Your loan terms
• Existing debts like an auto loan or student loans
• Housing expenses like utilities and maintenance costs
• Your retirement plan
• Whether or not you have an emergency fund saved

Getting a high-level view of your current financial situation will help you determine whether biweekly payments are right for you.

The Bottom Line

Biweekly mortgage payments can help you pay off your mortgage earlier and save money on interest. If you’re interested in applying for a home loan or refinancing your existing mortgage, apply with Rocket Mortgage today.