Bi-weekly Payments means that the borrower is paying every two weeks, or 26 half payments. The result is effectively 13 full payments over a 12-month period, accelerating payoff of the loan. The extra payment per year can provide significant savings in total interest over the life of the loan.The extra payment per year can provide significant savings in total interest over the life of the loan. However, borrowers should consider carefully before signing up for a biweekly mortgage since there can be some disadvantages to these types of payment plans.
How a Biweekly Mortgage Works
A bi-weekly payments allows the borrower to make the equivalent of one extra month’s mortgage payment over the course of a year. For example, if a borrower’s monthly mortgage payment is $1,200 per month, the biweekly mortgage equivalent would result in two payments of $600 every two weeks from the borrower. Although paying 26 half payments can lead to paying off the mortgage sooner, there are some advantages and disadvantages, particularly with how the payments are applied by the mortgage servicing company.
There are certain expenses that we all anticipate each month. If you own a home, one of these regular payments is likely for your mortgage.
By default, mortgage loans are repaid in 12 equal payments throughout the year, for the duration of your loan term. However, by making a small change in how and when you make those loan payments, you can reduce the total interest paid and satisfy your mortgage debt faster than planned. It’s all thanks to biweekly payments.
Let’s take a look at what biweekly mortgage payments are, the impact they can have on your finances, and why you should consider setting them up if you want to save money and time on your mortgage loan.A biweekly mortgage helps reduce borrowers’ overall interest costs, and the extra payment per year can help the borrower pay off the mortgage sooner and save in total interest over the life of the loan