Pay Your Mortgage Every Two Weeks

Traditionally, mortgages are paid off on a monthly basis. For some home owners, more frequent payments are preferred. One possible payment plan is a bi-weekly cycle, where you will pay half of what you would each month. Not all lenders offer this plan, but it is certainly worth inquiring with your mortgage company.

With the bi-weekly payment plan, you lower your interest and pay your loan off faster by making payments every two weeks instead of every four or five weeks. There are fifty two weeks in a year, so you will make twenty-sex payments every two weeks. This amounts to thirteen full payments a year, which is one more than you would have made with a monthly payment plan.

Your principal is reduced with the extra payment and therefore your interest is reduced as well. So by paying more often, you are reducing your interest, reducing your principal and reducing the length of your loan.

Sometimes if your mortgage company does not offer a bi-weekly payment plan you can inquire with a third party. There are companies that can give you a plan where they will pay your lender every two weeks and charge your credit or debit account. Of course this service will probably cost a fee.

Involving a third party may be a good idea, but you may want to avoid paying a fee for a service you can do on your own. Also, you will be relying on the third party to make the payments, so if they don’t follow through than you are in a very sticky situation. You also depend upon on them for administration and bookkeeping matters, so if money gets miscalculated or records get lost, it can cause a real problem for you. They will be getting paid for their services but that doesn’t guarantee they won’t screw up your mortgage deal.

As an example of the savings you would receive by using a bi-weekly payment plan, consider you have $150,000 as your loan for a term of 360 months with a six percent interest rate. Your monthly principal and interest payment would be $899.33 with $173,757 interest over the life of the loan. However, if you use bi-weekly payments, you would pay $449.67 every two weeks, pay $135,294 interest over the life of the loan, and pay the loan off in 24 years instead of 30.

Whether or not the bi-weekly payment plan is a good option for you is up to you. Do your own calculations and decide if the savings would be worth it. Also decide whether you would be able to make payments so frequently, and whether or not you plan on staying in your home or refinancing.