Biweekly Mortgage Payments: What They Are And How They Work

There are certain expenses 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 monthly 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 might want to consider setting them up to save money and time on your mortgage loan.

What Are Biweekly Mortgage Payments?

Mortgage loans are typically set up the same way. Once you’ve chosen your loan term (such as 15 or 30 years), your lender will establish a set monthly payment. You will make this payment once a month every month, until the loan is satisfied, for 12 equal payments a year.

With a biweekly payment plan, however, you’ll make a partial payment every 2 weeks instead. Simply divide your standard mortgage loan in half, and that’s your biweekly payment.

Simply put, if your monthly mortgage payment is $1,500, your biweekly mortgage payment will be $750.

How Do Biweekly Mortgage Payments Work?

Interest on mortgage loans is usually calculated on a monthly basis. This means that the lower your loan’s principal balance, the lower the interest charged will be.

By paying biweekly, you’ll reduce your principal balance slightly prior to that monthly interest being calculated. These savings will add up month after month, not only reducing your total mortgage interest, but also paying off your loan sooner. Let’s look at the math.

You’ll Make A Full Additional Monthly Payment Each Year

There are 52 weeks in a year, which means that with biweekly payments, you’ll make a total of 26 contributions toward your home mortgage. That actually equates to 13 full monthly payments versus the 12 you would have made with your standard repayment schedule.

Let’s say you have a $200,000 mortgage loan at a rate of 4.00% for 30 years. If you pay according to your lender’s standard amortization schedule, which shows how each payment is applied toward your principal balance versus interest over the course of your repayment period, then your loan will take 30 years to repay.

However, by making biweekly half payments – and essentially making one extra monthly payment a year – you’ll pay your loan off midway through year 25. That’s nearly 5 extra years being mortgage-free.

Less Interest Will Be Accumulated

Let’s use the same mortgage loan as our previous example ($200,000 for 30 years at 4.00%) to see how biweekly payments can impact your total mortgage interest paid.

With a 4.00% home loan, you’ll pay about $143,740 in interest over the life of your repayment if you make standard monthly payments as scheduled. However, by splitting your monthly payment in half and making a partial payment every 2 weeks, you’ll reduce that by tens of thousands.

In this example, you’d save more than $20,000 in interest over the life of your mortgage just by making biweekly payments.

Biweekly Mortgage Payments Vs. Monthly Payments

Let’s break down the difference between monthly payments and biweekly payments using the example from above ($200,000 for 30 years at 4.00%).

Pros And Cons Of Paying A Mortgage Biweekly

Making biweekly payments may come with advantages, like being able to enjoy some additional debt-free years, but there are some disadvantages to consider, as well.

Upsides Of Making Biweekly Mortgage Payments

• Less interest paid over time. A full additional payment means less interest is accrued at the end of the year.
• Your mortgage can be paid off faster. A biweekly payment schedule can shorten your mortgage repayment by several years.
• Payments can align with paychecks. If you’re also paid biweekly, switching to biweekly mortgage payments can simplify your budgeting.
• Home equity is accumulated faster. This can help you get rid of your private mortgage insurance (PMI) faster and tap into your home equity – if you need to.
• Making extra payments is easier. Scheduling biweekly payments divides one extra mortgage payment by 26 and spreads it out over the course of a year, which can be more manageable than paying a full additional payment at one time.

Downsides Of Making Biweekly Mortgage Payments

• It’s more of a financial commitment. Putting additional funds toward your mortgage means you’ll have less available for other savings goals or potential issues that arise.
• Fees for setting up biweekly payments. Some mortgage lenders charge fees for biweekly payments or use third-party processors who might also charge additional fees.
• It doesn’t positively affect credit score. It doesn’t negatively affect your credit score, either, but it might be frustrating to not see a boost in this area.
• Prepayment penalties. Some lenders charge prepayment penalties for paying off your mortgage early.

How To Set Up Biweekly Mortgage Payments

Some lenders allow you to automate biweekly payments. This feature makes it easy to pay down your mortgage loan faster and for less without you having to think about the process.

If your lender doesn’t offer an automated option, you’ll need to take matters into your own hands. If you’re wondering how to pay your mortgage biweekly, here are three ways to do so.

• Option 1: You can split your monthly payment in half, logging into your account every 2 weeks to make a payment. Your savings will be the same as if your lender allowed you to schedule biweekly payments. This option requires you to stay on top of these manual payments. If you forget to make the second payment one month, you may be charged a late fee by your lender.
• Option 2: Automate your regular monthly mortgage payment, taking the legwork out of your lender’s requirement. Then, each month you can make an additional principal payment equal to one-twelfth of your monthly amount due. At the end of the year, you will have made one extra mortgage payment and significantly reduced your principal balance due.
• Option 3: Simply make an additional (full) mortgage payment each year, in the month that works best for you. This one lump payment will go toward reducing your principal balance, though it won’t save you as much in interest as if you’d made regular contributions throughout the year.

FAQs About Biweekly Mortgage Payments

If you’re still curious and have more questions about how biweekly mortgage payments work, we’ve got you covered with these frequently asked questions.

How much faster do you pay off a mortgage with biweekly payments?

This will depend on your specific mortgage loan amount, your interest rate and the length of your repayment terms.

But generally speaking, biweekly payments can help you pay off your mortgage several years earlier than anticipated.

Can I split my mortgage payment into two payments?

Yes. There are a few ways to do this – the easiest being automating biweekly payments through your lender.

You can also do this on your own by making half of your monthly payment every two weeks.

Should I switch to biweekly mortgage payments?

This depends on your specific financial situation. Biweekly payments can help you pay your mortgage off faster, but you shouldn’t make the switch if it means you won’t have an emergency fund.

Also, you may want to consider this approach to pay down other debts with higher interest rates than your mortgage first.

Are there alternatives to biweekly mortgage payments?

Yes. If you want to lower your mortgage amount faster or reduce the amount of interest you pay, but biweekly payments aren't the right option for you, there are other options.

You could look into a refinance to get a lower interest rate or just pay a little more each month when you can. Additionally, you can use any extra funds that come your way (think tax return or bonus) to put toward your mortgage.

The Bottom Line: Making Biweekly Mortgage Payments Can Save You Time And Money

Your home is likely the biggest purchase you will ever make. Even with an interest rate in the single digits, this can often mean tens or hundreds of thousands in interest charges over the life of your repayment – a significant chunk of change you probably wouldn’t mind keeping in your pocket.

Whether you’re already a homeowner or are looking forward to buying a home in the future, making biweekly mortgage payments can reduce the overall amount of mortgage interest paid. Not only that, but you can pay off your home loan earlier than scheduled, eliminating that monthly mortgage payment and freeing up your budget even faster.

Luckily, lenders like our friends at Rocket Mortgage^® make biweekly payments simple. Rocket Mortgage borrowers can set up biweekly mortgage payments for free online with no prepayment penalties or fees for setting up a revised payment schedule. You can automate the process and save yourself money with just a few quick clicks. If that sounds appealing and you’re in the market for a home, you can get started today with Rocket Mortgage.