What Is a Bi-weekly Mortgage

How to Setup a Bi-Weekly Mortgage

The absolute best way to set up a bi-weekly mortgage payment is by enrolling in a program with your mortgage lender directly. If your lender doesn’t offer this as an option, there are third party services which will allow you to pay off your mortgage in bi-weekly installments. The small qualm being that these companies do have a setup fee and some of the terms of the contract can be less flexible and create more rigidity with regards to repayment. It also may be difficult to unenroll from the program once it’s started. Otherwise, you can always chose to just prepay the extra amount on your mortgage each month.

Potential Benefits of Bi-Weekly Mortgage

Potential benefits are that you will be paying off your mortgage at a quicker rate and therefore be paying less in interest. There are 52 weeks in a year, so when setting up payments bi-weekly you will actually be making the equivalent of 13 monthly payments on your mortgage throughout the course of each year (26 bi-weekly payments). Besides the benefit of increased interest savings and a much quicker payoff date you’ll also be able to line up the mortgage payment directly with the date you receive your paycheck and have it come out at a more convenient time each month. This could help you align the payment more closely with your pay date in order to help offset the increase in payment frequency.

Potential Drawbacks

Drawbacks are that you will ultimately have a more frequent monthly debt obligation and higher yearly obligations towards your mortgage repayment. Although the 13 payments are conveniently divided where the impact is certainly less noticeable, this does allow consumers to handle the increase in total payments in bite-sized chunks. If the bi-weekly program is not setup with your original lender you will also pay processing fees and it may be more difficult to unenroll from the program and go back to a once a month repayment period. This mean you’ll likely have to stay at that payment level so make sure you can handle the increase amount and its subsequent impact on your financials.

Potential Savings

Potential interest savings can really be truly significant over the course of the lifetime of your mortgage. Consumers typically pay hundreds of thousands or even millions in interest payments over the 15 to 30-year repayment period that most consumers opt for when getting a conventional mortgage. Depending on the loan amount, interest payments could be tremendous over the course of those decades. Likewise, the savings from paying off your mortgage earlier in any regard, whether using a bi-weekly payment method or not can be tremendous in the long term. You could potentially save yourself hundreds in thousands and cut the length of your mortgage down by years.

All in all, setting a bi-weekly mortgage payment could be the thing you need to put your mortgage payoff in overdrive. Many Americans dream of owning a home and once they’ve acquired that home many also dream of paying down that same home. Paying off debt is a big accomplishment and it’s something that we should all strive for. However, don’t forget this isn’t the only option for those who want to aggressively pay down their mortgage. You can also opt make additional pre-payments at your leisure, but using the bi-weekly method is a sure-fire and more planned approach to achieving that desired goal.