Why Paying Your Mortgage Biweekly Can Save You Money

What Are Biweekly Mortgage Payments?

Biweekly mortgage payments are a way of structuring your home loan payments with the goal of saving money. The idea behind biweekly mortgage payments is simple: Instead of making one full monthly payment, you pay half your monthly mortgage amount every two weeks.

The magic of this biweekly payment strategy lies in the calendar. There are 52 weeks in a year, and if you pay twice monthly, say on the 1st and the 15th of each month, you'd make 24 payments annually. Paying every two weeks, on the other hand, allows for 26 total payments. As a result, the biweekly method results in the equivalent of one extra full payment each year.

Learn more: Ways to Save Money on Your Mortgage

How Do Biweekly Mortgage Payments Save You Money?

Biweekly mortgage payments can save you money by helping you pay off your mortgage sooner and save interest in the process. You may save money on interest in two ways:

• By making more frequent payments to bring down your principal balance, there's less of a balance to calculate interest.
• By paying off your mortgage sooner, you could potentially wipe out several years of interest payments.

"A biweekly payment plan is far more effective than merely sending one additional payment per year," says Michael Hausam, a real estate agent and mortgage broker in Newport Beach, California. "Your loan balance accrues interest every day, and reducing that principal balance every 14 days (26 half payments per year) saves more in interest charges than one full additional payment every 12 months, even though the total amount in payments every year remains the same."

Biweekly Mortgage Payments Example

Let's say you have a 30-year mortgage of $400,000 with a fixed interest rate of 6.5%. Your monthly payment is $2,528.27, but you decide to make biweekly payments of $1,264.14 every two weeks. By doing so, you could trim five years and 11 months' worth of payments off your mortgage loan and save $119,128.82 in total interest on the loan—all without refinancing your mortgage.

Learn more: How to Pay Off Your Mortgage Early

How to Make Biweekly Mortgage Payments

To make biweekly mortgage payments, you'll need to first check if your loan servicer allows it. In some cases, you can elect to pay biweekly by looking for the autopay biweekly option in your payment portal. In other cases, you may need to contact your lender.

If you don't already know for sure, it's a good idea to contact your lender and ask them these questions:

• Do they allow partial payments? Unfortunately, not all lenders accept biweekly mortgage payments. Ask if you're able to set up this payment schedule.
• How are partial payments applied? Ask your servicer if they apply additional funds to your loan's principal. If you want to boost your home equity faster, your lender must agree to immediately credit half of each monthly payment toward the loan. Some lenders hold partial payments—without crediting them to your account—until they receive the rest of your mortgage payment. In this case, you won't save as much in interest since these payments are not instantly applied.
• Will modifying your payment schedule lead to fees? Check to make sure a biweekly payment plan won't cause you to incur any additional payment processing fees, for example. Also, check to make sure your loan doesn't charge prepayment penalties.

Learn more: Ways to Build Home Equity Faster

Should You Pay Your Mortgage Every Two Weeks?

If you're aiming to pay off your mortgage sooner or trying to save on interest, making biweekly payments can be a solid option. Here's what to consider.

When It May Make Sense to Make Biweekly Mortgage Payments

• When your goal is to save on interest: If you have a high interest rate, biweekly payments can lead to considerable savings over the life of the loan. When you reduce your loan balance more often, you also slow down how fast the interest charges grow.
• When it works for your pay schedule: Making biweekly payments can also make sense if you receive your paycheck every other week. Aligning your paycheck with your mortgage payments may make budgeting more manageable and ensure you always have the funds when your payment is due.

When It May Make Not Sense to Make Biweekly Mortgage Payments

• When it puts a strain on you financially: Since making extra mortgage payments will cost you more, switching to a biweekly payment schedule may not benefit you if you don't have a steady income and can't comfortably manage the increased payments. Run the numbers first to ensure you can cover all your financial obligations while paying more toward your mortgage.
• When your lender charges prepayment penalties: You might not want to pursue a biweekly mortgage payment strategy if your mortgage carries a hefty prepayment penalty. Some lenders impose prepayment penalties so substantial that they could negate the interest savings from early repayment. Refer to your mortgage contract or contact your lender to determine if your lender charges a fee if you pay off your mortgage early.
• When your money could go further elsewhere: Saving money on your mortgage is an appealing prospect, but be sure you're checking other important financial boxes before you direct funds toward this goal. For example, if you're currently carrying debt with a higher interest rate than your mortgage, then putting extra money toward that debt first could save you more overall. Also, if you aren't currently saving for retirement or don't have an emergency fund, making a plan to fund those goals may take priority over extra mortgage payments.

Alternatives to Biweekly Mortgage Payments

Fortunately, if your lender doesn't allow biweekly payments, you can still pay off your mortgage early and save money.

Make an Extra Payment Every Year

Remember, a biweekly mortgage payment schedule equals one extra payment each year. Another way to make an extra annual mortgage payment each year is to add one-twelfth of your usual mortgage payment on top of your monthly bill.

The benefit of manually making an extra mortgage payment each year is that you won't have to adjust your whole budget or payment schedule to make it work. Plus, you could align your extra payment with a time you typically have some extra funds, such as when you anticipate an annual bonus.

Tip: Putting any extra windfalls you come by directly toward your mortgage could help you pay off your mortgage faster. You can direct tax refunds, bonuses and other additional money you receive toward your principal balance.

Refinance Your Mortgage

Refinancing your mortgage could give you a shorter repayment term and lower interest rate. Decreasing a 30-year repayment term to 15 or 20 years could save you significantly on interest—although it could significantly increase your monthly payment.

Tip: If you're considering refinancing your home loan, watch out for closing costs and origination fees. These can offset your interest savings if you move out before reaching the break-even point.

Eliminate PMI

Private mortgage insurance (PMI) can add several hundreds of dollars to your monthly mortgage payment. Thankfully, you can eliminate your PMI on a conventional loan by accruing 20% equity in your property, typically by making regular payments over time or having a home appraisal that demonstrates a higher property value.

Contact your lender to discuss removing your PMI payments. Once you no longer have to pay PMI, you can funnel those funds towards the principal balance on your mortgage each month to pay off your home loan sooner.

Tip: Mortgage insurance can't be automatically eliminated from an FHA loan. In this case, you may have to refinance to a conventional loan once you meet equity and other requirements to get rid of it.

Learn more: How to Get Rid of Private Mortgage Insurance (PMI)

Create More Room in Your Budget

Look for ways to create extra money in your budget you can direct toward your principal mortgage balance. Carefully review your nonessential purchases, such as unwanted gym memberships and streaming services, to determine which ones you can cut from your budget.

On the other side of the ledger, consider ways you can increase your income. For example, you might volunteer for overtime at work or ask for a raise if your salary falls short of the industry standard for someone with your qualifications and experience.

Improve Your Credit for Greater Financial Strength

If your lender allows it, paying your mortgage biweekly can help you pay off your mortgage early and save substantial interest. Paying off your home early can help strengthen your financial stability, especially if you can do so before retirement when income often diminishes.

As you work to strengthen your finances, it's also important to keep an eye on your credit. Start by checking your credit report and FICO^® Score^☉ for free with Experian. Maintaining a high credit score can help you qualify for a refinance or other credit options with favorable rates to save you money.