Many Americans today are working to pay off debt. The largest source of household debt in the U.S. by far is housing debt, making up 72% of the total in the fourth quarter of 2021, according to the Federal Reserve Bank of New York.
Some borrowers plan to pay off their mortgages early through biweekly mortgage payments. Making payments biweekly as opposed to monthly means you make the equivalent of an extra monthly mortgage payment each year, which could help you accomplish your goal of debt reduction and save you money.
There are some drawbacks to consider, however, and it’s essential to look at your financial situation and goals to determine the best payment schedule for you.
Key takeaways
With biweekly mortgage payments, you make half of your monthly mortgage payment every other week.
You made 26 payments a year, which totals 13 months of payments — one more than you would make with monthly payments.
Biweekly payments save you money on interest and help you pay off your mortgage faster.
Paying your mortgage biweekly
If you opt for biweekly mortgage payments, you essentially split your required monthly mortgage payment in half and pay every other week instead of monthly.
Making biweekly payments adds the equivalent of one monthly mortgage payment each year, which helps you pay off your mortgage sooner.
Some borrowers choose to make biweekly mortgage payments to pay off their mortgage loans faster. As opposed to making 12 payments in one year, you’ll make 13 full mortgage payments if you pay biweekly.
This type of payment plan helps you budget your mortgage payments more effectively if you are paid weekly or semimonthly. Instead of one large monthly payment, you can make smaller payments more frequently.
Before you decide, you’ll need to clear this new payment plan with your lender — some lenders require you to get approval to make biweekly payments. You’ll also want to check for any fees associated with changing the payment plan.
Many lenders make it easy for you to switch to biweekly payments — one Quicken Loans customer in Tennessee noted they were able to make the switch from the lender’s app.
Calculating biweekly payments
Here’s how biweekly payments work: Say you currently have a $250,000, 30-year fixed-rate mortgage loan with an interest rate of 5.29%. Your monthly payment of principal and interest equals $1,386.71 and adds up to $16,640.52 annually. However, if you choose to make biweekly payments, you’ll pay $693.35 every other week, or $18,027.10 total for the year.
With biweekly payments, though, you pay much less in interest over the loan term because you pay off more of your mortgage each year. You could potentially save $49,635.61 in interest alone. You also reduce the time it takes to pay back the loan from 30 years to 25 years.
Biweekly payments*
Monthly payments*
Fixed payment amount
$693.35
$1,386.71
Total interest paid
$199,579.82
$249,215.43
Total repayment term
25 years
30 years
*Payments shown for loan principal and interest on a 30-year fixed-rate loan of $250,000 with an interest rate of 5.29%
Benefits of biweekly mortgage payments
A significant benefit of biweekly mortgage payments is that you’ll pay much less interest over the life of the loan. You’ll finish paying off your loan faster because you’ve made extra payments each year.
The sooner you pay off your mortgage loan, the sooner you can use that cash for other purposes.”
Biweekly payments help you free up cash sooner. For most individuals, their mortgage payment is the largest expense each month. The sooner you pay off your mortgage loan, the sooner you can use that cash for other purposes.
Drawbacks to paying biweekly
There are some drawbacks to consider with biweekly payments. First, your lender may impose prepayment penalties if you pay off the loan before the loan term has ended. This penalty is generally assessed as a percentage of the loan balance.
Before switching to biweekly payments, consider whether you could use those funds for investing or paying off high-interest debts.
For the most part, this penalty only applies if you pay off the loan balance within the first few years of obtaining the mortgage loan. Before you decide to make extra payments, you should refer to your original loan agreement to review the terms and fees associated with prepayments.
Another drawback is that you’ll spend more each year on housing costs. Biweekly payments mean you’ll make the equivalent of one extra monthly mortgage payment each year, which could be an issue if you already have a tight budget.
Also, the cash you spend on additional mortgage payments could have been invested to earn more money. According to the Securities and Exchange Commission, over the long run, the stock market averages a 10% return annually, so you may lose out on the opportunity to earn a return of 10% by paying off a loan with a 5% interest rate.
FAQ
How many biweekly payments are there in a year?
There are 26 biweekly payments in one year (52 total weeks in a year divided by two).
What’s the effect of paying extra principal on a mortgage?
Interest is calculated as a percentage of the principal remaining on a loan. Because mortgage loans are fully amortized, each fixed monthly payment contributes to paying off both principal and interest (though payments made in the first few years contribute mostly to interest).
As principal decreases over time (though slowly at first), the amount of interest decreases as well. So, paying extra principal on a mortgage reduces the amount of interest you owe overall and lets you pay off the loan sooner.
How do you pay off your mortgage early?
You can pay off your mortgage early in a few different ways. You can make biweekly payments or make irregular payments towards principal (in addition to making your required monthly payments).
If you want to pay off your mortgage early but don’t want to commit to making biweekly payments, you can choose to make a one-time payment that fits your budget. Be sure the lender knows you want the extra payment to go toward the principal and not toward interest.
Bottom line: Should you pay your mortgage biweekly?
Biweekly payments help borrowers pay off their mortgage loans sooner, which reduces the amount of interest paid on the loan. Before you decide to make extra mortgage payments, you’ll want to consider your overall financial situation. For example, it may not make sense to pay off a low-interest mortgage loan early with funds that could be used to pay off high-interest debt (like credit card balances).
However, it could make sense to make biweekly payments if you can comfortably afford the additional cost in your budget and it doesn’t cause you to go into debt in other ways.
As part of your decision, you’ll want to consider how much you have saved. Most experts recommend having three to six months of living expenses saved before paying off mortgage debt early. If you’re having difficulty deciding which course of action to take, it may make sense to speak with a financial advisor about your options.
Article sources
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