Do Bi-Weekly Mortgage Payments Help You In the Long Run?

If there’s one thing that homeowners don’t like when it comes to their home loans, it’s definitely the interest. Wouldn’t life be easier if there was less interest to pay? After all, interest doesn’t help you at all — it’s profit to the lender, because they are letting you borrow the cost of the home over time. If you’re thinking about trying to pay off your loan faster, you will need to actually deploy some strategy. Thankfully, it’s not really as hard as some people make it out to be.

Most lenders these days realize that people want to pay off their mortgages sooner, and even have payment plans for you to do it. You can pick up a bi-weekly mortgage payment plan, where you get to make half your full mortgage payment every two weeks instead of once a month. 26 half payments add up to 13 full payments, which is one more payment than you would have made under a traditional plan every year. It doesn’t seem like much, but the math really is in your favor. Here’s why.

Most of your payments are going to tackle both interest and principal, which means that your principal will go down slowly with time. However, what happens to that extra payment? It’s actually all principal, which can help bring the balance down a lot sooner year to year.

Your lender will most likely charge a small fee to set up the bi-weekly mortgage plan, as it will be deducted from your bank account every two weeks. Very rarely will the lender just trust you to send in half now and half later.

What to see the numbers in action? Let’s take a modest mortgage with a balance of 150,000, a 30 year term (360 months), and an interest rate of 6% — not too bad, right?

Your monthly payment, which includes principal and interest, would be about $899.93. So let’s go bi-weekly!

Your payment every two weeks is $449.67. The total interest during the life of the loan is 135,294 — compared to the 173,757 that you would normally pay. What’s pretty is that the loan is paid off in 24 years instead of 30. That’s a lot of cash saved and it doesn’t really affect your family’s lifestyle at all. It might take some getting used to, but the benefits of bi-weekly mortgage payments are truly tough to beat!