Should You Make Biweekly Mortgage Payments?

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To make, or not to make biweekly mortgage payments: that is the question facing many conflicted homeowners today. With alluring ads asserting the plan takes years off your mortgage and saves on interest, a biweekly plan is a persuasive package for individuals eager to pay off their homes. But when you pull back the ribbons…

To make, or not to make biweekly mortgage payments: that is the question facing many conflicted homeowners today.

With alluring ads asserting the plan takes years off your mortgage and saves on interest, a biweekly plan is a persuasive package for individuals eager to pay off their homes.

But when you pull back the ribbons and pretty paper, the decision gets dicier.

Read on to see the advantages and disadvantages of a biweekly mortgage as we settle the debate once and for all.

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First Things First: How It Actually Works

Before we dig into the pros and cons, let’s break down how a biweekly mortgage payment really functions. It might not operate exactly how you think it does.

There are 52 weeks a year, so if you pay half of your total monthly mortgage payment every other week, you end up making 26 payments.

If you pay twice a month all year on a traditional mortgage, you make 24 payments in that time.

The biweekly method of mortgage payments actually causes you to make two extra “half” payments per year, or the equivalent of one extra monthly payment over the course of the year.

So far so good, right? Let’s look at some of the pros and cons beneath the surface.

Why You Might Make Biweekly Mortgage Payments

To highlight the merits of a biweekly plan, let’s look at an example.

Here’s what a biweekly mortgage payment looks like in action:

If your mortgage is $1200 per month, you pay $14,400 per year in once-a-month payments.  If you decided to send biweekly payments instead, then you would send $600 every other week.

It sounds the same until you realize you’ll be sending 26 payments of $600 instead of 24 payments of $600.

The extra $1200 is applied to your mortgage principal, which pays your mortgage off sooner and reduces the amount of money you pay for interest.

The larger your mortgage, and the higher your interest rate, the greater your savings.  To give you an idea, on a $100,000, 30 year fixed mortgage with 6.5% interest, you can expect about $127,544 in interest on top of the $100,000.  If you pay half the mortgage payment every two weeks instead of making once-a-month payments, you save over $30,000 in interest!

  • As common sense and the example above show, biweekly mortgage does pay off your mortgage faster. Say you’re paying a 30-year traditional mortgage. With a biweekly plan, you could be finished in around 26 years. Who doesn’t want to own their home and be debt-free in the shortest amount of time possible?
  • Biweekly mortgage payments work well with budgets. You pay the same amount, from the same place, at the same time every two weeks.
  • You could save on interest since the payments are geared towards the principal.
  • You’re building equity. Technically, since you’re making payments every other week as opposed to every month, you own more of your property quicker.

At this point, you might be asking yourself where you can sign up.

Don’t Google those enrollment plans just yet, because you’re about to see the other side of the coin.

Why You Shouldn’t Make Biweekly Mortgage Payments

Above was an example of an ideal biweekly mortgage plan. We’re now going to turn to an instance highlighting the dark side of biweekly payments.

Search the terms Paymap and 2015, and you’ll be met with a slew of articles detailing their payout to disillusioned homeowners on biweekly mortgage plans.

That year, the Consumer Financial Protection Bureau charged the Western Union subsidiary $5 million and required them to pay back over $33 million in fees to customers.

Why? The fees tied to the biweekly mortgage plan were unjustified and the estimated savings on interest they marketed were baseless and wildly exaggerated.

Let’s dig into those points and a few more reasons you shouldn’t (exactly) make biweekly mortgage payments.

  • Fees. Not all, but some banks and third-party finance managers do charge you fees to enroll in a biweekly mortgage payment plan. Worse still, a number of them charge continued transaction fees.
  • Exaggerated Benefits. The Paymap case is a great point of reference here. Many biweekly payment programs tout impressive numbers with questionable methodology. Just because the Smiths saved over $33,000 (the number Paymap advertised) on interest doesn’t mean you will. On a similar note, a lot of companies claim you’re paying down your principal every two weeks but actually only submit your payment to the mortgage servicers monthly.
  • You Pay More. While making 26 payments a month means you finish paying your mortgage earlier, it also means paying more. A full extra mortgage payment a year can put a strain on homeowners budgeting for a multitude of expenses.
  • It’s Not Ideal for the Unexpected. Job loss, health problems, and accidents are inevitable. Despite the draw of a biweekly mortgage when life runs smoothly, it can be detrimental to one’s credit and well being in trying times.

The Verdict

Are you a bit skeptical about biweekly mortgage payments at this point? If so, we’re with you.

It’s an incredibly enticing idea: if you budget for an extra payment each year and pay your mortgage twice a month, you’ll own your home sooner and save on interest.

With any financial decision, though, you have to weigh all the factors.

With biweekly mortgage payments, it’s not the premise that’s flawed, but the fine print.

So what if you’re intrigued by the idea but cautious because of the red tape?

Do It Yourself.

Here’s what it boils down to: With a biweekly plan, you’re essentially paying for automation and trapping yourself contractually.

As long as there is no penalty for paying off your mortgage early,  nothing is stopping you.

If the perks of biweekly payments appeal to you, ditch the third-parties, contracts, make your own biweekly payments, and reap the benefits, no fees needed.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Briana @ GBR says

    This is a great plan. I didn’t think about the extra month’s payment (since there’s some months that have 5 weeks instead of 4). Will definitely keep that in mind as I’m searching for a house.

  2. Robert says

    Most mortgages do not have a early payoff penality. With the stock markets flaundering you would be better off to put more money in your home. Having your home paid off early is certainly a good thing.

    If it is possible in your financial situation, I would switch to bi-weekly mortgage payments.

    • Ryan says

      This is something I’ve know about for a long time, but haven’t actually started doing. I’ve been paying extra (roughly an extra payment each year when it adds up), but I haven’t been sending in the checks every 2 weeks. The added benefit of sending in the checks early is that it incrementally reduces your outstanding balance and slightly reduces the assessed interest with each payment. It adds up over time!

      I think I should take my own advice on this one! 🙂

  3. KP says

    Great financial tip Ryan! Sometimes mortgage companies share the savings benefit with you too. The only catch is they want you to signup to have them handle the payment for you for a FEE (oh, the price you pay for convenience)!!! I’m with you in doing it yourself to save more money. 🙂

  4. Thrifty Gal says

    What I did was just add some extra money (whatever I could afford) each month (after I replenished savings depleted by the down payment). I paid off my home in 13 years. How can you send in an extra payment when they give you only 12 coupons?

  5. WR says

    Good article.

    The math makes sense but you need to make sure that your lender will accept bi-weekly payments.

    If your lender simply sandbags the first payment and applies it to your loan once per month there is no benefit.

    I have heard of people sending in extra payments clearly marked ‘principal curtailment’ that were just applied to the following months mortgage.

    I don’t think there is a conspiracy. It is more a case of most lenders do not see extra payments very often.

    Once you verify that the extra payment is being applied correctly you benefit from the relatively minor change in payment structure.

    Those of us who use automatic bill-pay through our banks can make this process even more effective.

    -WR

    • Ryan says

      Great point, WR. My bank automatically applies the payment on the due date, regardless of when they receive it, unless I tell them otherwise. Many banks will work with you and apply the payment when they receive it, but they may need the instruction for it to take effect, simply because of the policies htey have in place.

  6. kim says

    Just a caution to all. There is a slight negative to biweekly payments. For the most part they work great, but I am going thru a real learning experience right now. Quick overview: We own two businesses and my husband plays an important part in both. He had a medical emergency that put him out of work for 18mths out of two years. One of my loans was on biweekly payments. We fell behind on that loan due to no regular income. I asked the bank to take me off auto withdrawl which on the contract included biweekly payments. I ASSUMED that was all I needed to do. We are making double payments on all loans to catch up and I keep falling further behind on the one that was on biweekly. We just were told that we are still expected to make the extra payments on the loan, even though we were under the assumption that all had gone back to one monthly payment. So my advice to anyone considering biweekly payments is to be sure you understand the terms, (as with any loan) because you never know when an emergency can pop up in your life. We all like to think this wont happen to us. I was never late on a payment and never dreamed I would have to deal with this, so read understand and file this advice for future reference.

  7. Jake says

    Ryan,

    Great article, it’s important for consumer to understand the effects of long term debts. . . . small changes to the way they get repaid can have enormous effects on the amount of interest you pay -or- save! Whether someone tries to do it themselves, or decides on a third party to administer their result to help guarantee the results prepayment of loans should be discussed more frequently. Our county wouldn’t be int he mess it is today, if Americans didn’t maintain such a large appetite for debt. thanks for the article!

  8. Julie says

    I just want to make sure I understand correctly, at this very moment were contemplating signing up for either bi-weekly or just sending in extra payment at the end of the year. It sounds like the bi-weekly is a better option?

    We keep getting mail from our mortgage company, however they want to charge over $375.00 that part doesn’t make sense to me.

    Your thoughts?

    • Ryan says

      I don’t think it’s worth paying your mortgage company anything to make biweekly payments. Most mortgages nowadays have no prepayment penalties, so you would essentially be paying them for something you can do yourself. I recommend looking at the terms on your mortgage to verify there is no prepayment penalty, and if there isn’t, then just set up your own bi-weekly payment plan with an automated payment schedule through your bank.

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