Most homeowners are familiar with the monthly payment schedule for paying off a mortgage. However, an alternative method can save homeowners significant money over the life of their mortgage: a biweekly mortgage payment plan. This method involves making payments every two weeks instead of once a month, and it is an effective way to pay off your mortgage faster and reduce your overall interest costs.

This article will explore how a biweekly mortgage works, the benefits, and how to use a biweekly mortgage calculator to determine your savings potential.

What Is a Biweekly Mortgage Payment?

A biweekly mortgage payment plan is exactly what it sounds like: Instead of making monthly mortgage payments, you make a payment every two weeks. These payments are typically half of your regular monthly payment. Over a year, this results in 26 payments instead of 12. The savings you make on the extra payments you make are key.

Even though you only pay half of your monthly mortgage payment every two weeks, you’ll make an extra full payment over the year. This additional payment directly reduces the principal balance of your loan, reducing the interest you pay over time. The more often you pay, the faster you pay off your mortgage, which translates into significant interest savings.

How Does a Biweekly Mortgage Work?

Here’s how a biweekly mortgage payment schedule works in practice:

1. Half of your monthly payment every two weeks: Instead of paying your full monthly mortgage payment on the first of the month, you’ll spend half of that amount every two weeks. For example, if your monthly mortgage payment is $1,200, you’ll pay $600 every two weeks.

2. 26 payments per year: There are 52 weeks in a year, so with biweekly payments, you’ll make 26 payments. Since each payment is half of your regular monthly payment, it’s one full extra payment per year.

3. Principal reduction: This extra payment directly reduces your loan principal, meaning you’re paying off your mortgage faster and reducing the interest you accrue.

4. Interest savings: The more often you make payments, the faster the principal is reduced and the less interest you pay over the life of the loan. In many cases, this can save you thousands of dollars.

Why Choose a Biweekly Mortgage Payment Plan?

There are many reasons why homeowners choose a biweekly mortgage payment plan. Here are some of the key benefits:

1. Pay off your mortgage faster

The most obvious benefit of switching to a biweekly mortgage payment schedule is that you can pay off your mortgage much faster. While your monthly payments stay the same, you’re making an extra payment each year, which can shave years off the length of your mortgage.

For example, with a 30-year mortgage, you can pay it off in 25 or 26 years instead of the full 30 years. It is because the extra payments reduce the principal balance and the interest you pay.

2. Save money on interest

A less obvious benefit of biweekly mortgage payments is interest savings. Because your mortgage balance is reduced faster, the interest you pay over the life of the loan is also reduced. Mortgage interest is usually calculated on the remaining loan balance, so the faster you reduce that balance, the less interest you’ll pay.

For example, if you have a $200,000 mortgage at 4% interest over 30 years, using a biweekly payment plan could save you tens of thousands of dollars in interest.

3. Automatic Payment Structure

Many homeowners find it easier to manage their finances with biweekly payments. Since you’re making payments every two weeks, you don’t have to wait until the end of the month to pay. It can help align your mortgage payments with your paychecks, especially if you pay biweekly. It can also create a more consistent budget pattern, making tracking expenses and managing other bills easier.

4. Faster Equity Build-Up

By paying down the loan principal more quickly, you can also build equity in your home faster. This can be beneficial if you sell your home or refinance your mortgage. The quicker you build equity, the more money you can put toward a down payment or other debt on your next property.

How to Calculate Your Biweekly Mortgage Payments

You can use a biweekly mortgage calculator to calculate your biweekly mortgage payments and potential savings. These calculators are designed to give you an accurate picture of how much you could save by making biweekly payments instead of monthly payments.

Here’s how to manually calculate your biweekly mortgage payments and use a mortgage calculator:

1. Enter your loan details

You’ll need the following information:

• Loan amount (principal)
• Interest rate
• Loan term (e.g. 30 years)

2. Find your monthly payment

First, calculate your typical monthly payment using an online mortgage calculator or standard mortgage formula. If you have a fixed-rate mortgage, your monthly payment may be fixed, and you can easily find this amount.

3. Calculate half of the monthly payment

Next, take your monthly mortgage payment and divide it by two. It is the amount you’ll pay every two weeks.

4. Use a two-week mortgage calculator

You can enter these details into a two-week mortgage calculator to fully understand how much you’ll save. This tool will show how much you could save in interest and how many years your mortgage could be shaved off. It will also show you how much extra principal you’ll pay off over time because of the additional payment each year.

Example: Biweekly Mortgage Payment Calculation:

Suppose you have a $250,000 mortgage with a 4% annual interest rate for 30 years. Your monthly payment is about $1,193.54. With a biweekly payment plan, you would pay $596.77 every two weeks. Over a year, this would result in 26 payments totaling $15,484.02, an additional $596.77 compared to your monthly payment plan.

By paying this extra amount toward principal, you could shorten the life of your mortgage by several years and save tens of thousands of dollars in interest.

Things to Consider Before Switching to a Biweekly Plan:

While the benefits of a biweekly mortgage plan are clear, there are a few things to consider before making the switch:

1. Check with your lender: Some lenders charge a fee to set up biweekly payments, while others may offer the service for free. It’s important to understand any fees or restrictions before making the switch.

2. Manual payments: If your lender doesn’t offer an automated biweekly payment plan, you may have to make payments manually. It can be inconvenient for some homeowners.

3. The extra payment may not be applied immediately: Remember that the additional payment you make each year may not directly reduce your principal unless your lender applies it correctly. Ensure your lender knows you want the extra payment applied to your mortgage principal.

4. Discipline required: You must have the financial discipline to make your payments on time every two weeks. If you miss a payment, you may lose some of the benefits of this strategy.

Conclusion:

A biweekly mortgage payment plan is a powerful tool for homeowners looking to pay off their mortgage faster and save money on interest. By making payments every two weeks instead of once a month, you make an extra payment each year, which reduces your loan principal and speeds up your mortgage payment. A biweekly mortgage calculator can help you estimate how much you could save and how quickly you could pay off your loan.

Before switching to a biweekly plan, check with your lender about any fees or restrictions and ensure the extra payment is applied to your loan principal. With the right planning, a biweekly mortgage schedule is a smart strategy for achieving financial freedom quickly.

FAQ'S

How do I calculate my biweekly pay?

To calculate biweekly pay, multiply the number of hours you work each week by 2 to find the number of hours you work each pay period. Then, multiply that by your hourly wage.

What is biweekly pay?

Biweekly payroll is when you receive payment every other week on a specific day. It means you receive a paycheck 26 times a year, usually twice a month.

How to pay a mortgage biweekly?

Divide your monthly mortgage payment by 12, and make one principal-only extra mortgage payment for the resulting amount each month.

What is the formula for biweekly payments?

Your bi-weekly pay is calculated by multiplying your daily or hourly rate by the number of days or hours you are paid.