Should You Make Biweekly Mortgage Payments?

How biweekly mortgage payments work

If you opt for biweekly mortgage payments, you split your required monthly mortgage payment in half and pay every other week instead of once per month. Since there are 52 weeks in a year, this equals 26 payments, or 13 “months” of payment — one more than you’d make by paying once monthly.

Making biweekly payments adds the equivalent of one extra monthly mortgage payment each year.

Since this extra payment goes toward your principal balance, you’ll pay off your mortgage sooner and with less interest. But it can also help you budget more effectively if you align payments with your paycheck.

“It can be possible to time your biweekly mortgage payments to pay out every time you get a paycheck as a matter of convenience,” explained Chuck Williams, CEO of Percy, a real estate and mortgage data analytics and marketing company.

“So you can spread the pain that way and pay down the loan faster, as there are more payments made during the year,” he said.

» MORE: Should you pay off your mortgage early?

Biweekly vs. semimonthly payments

Biweekly and semi-monthly payments sound similar, but they work very differently — and only one can help you pay off your mortgage faster.

True biweekly payments entail one payment every two weeks, totaling 26 payments per year. The extra payment goes directly toward your principal, reducing interest costs and shortening your loan term.

With semimonthly payments, you’ll make two payments per month, often on set dates such as the first and the 15th. This equals 24 payments per year, the same as if you paid once per month. While this schedule spreads out payment, it doesn’t reduce interest or loan payoff time.

Calculating biweekly mortgage payments

Let’s 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. With this example, you would save $49,635.61 in interest over the life of the mortgage. You would also reduce the time it takes to pay back the loan from 30 years to 25 years.

When biweekly payments make sense (or don’t)

Biweekly mortgage payments aren’t a one-size-fits-all strategy. Whether they help or hurt depends on your loan details and overall financial goals.

When biweekly payments are advantageous

Biweekly payments likely make sense in these scenarios:

• You have a higher interest rate. The higher your rate, the more you benefit from paying down principal faster. Biweekly payments can help reduce the total interest on loans with rates that are well above today’s lows.
• You’re early in a long loan term. Borrowers in the first half of a 30-year mortgage see the biggest gains, since more of each payment goes to interest early on.
• Your lender applies payments immediately. True biweekly plans that credit payments as they’re received help lower your daily interest balance faster.
• You have a steady, predictable income. If you’re paid every two weeks, biweekly payments can match your cash flow and make budgeting easier.
• You’re already on track with other debt. Biweekly payments make sense when high-interest debt, like credit cards, is already under control.

When biweekly payments are less beneficial

In these instances, it’s less advisable to opt for biweekly mortgage payments:

• Your mortgage rate is very low. If your rate is well below current averages, the interest savings may be modest compared to investing extra cash elsewhere.
• Your loan has prepayment penalties. Some mortgages charge fees for paying ahead, which can cancel out potential savings.
• You’re close to the end of the loan. Biweekly payments offer less benefit late in the term, when most interest has already been paid.
• Your income is irregular. Freelancers or seasonal workers may struggle with the stricter payment schedule.
• You have higher-priority debt or limited savings. Paying extra toward a mortgage may not be wise if you’re carrying high-interest debt or lack an emergency fund.

How biweekly payments affect home equity and sale proceeds

Biweekly mortgage payments can help you build home equity faster, which may leave you with more money in your pocket when you sell. Equity is the difference between what your home is worth and what you still owe on your mortgage. When you make extra payments toward principal, that balance drops sooner.

For example, imagine you have a $300,000, 30-year mortgage at a fixed interest rate. By switching to true biweekly payments, you could pay off the loan several years earlier and reduce total interest paid by tens of thousands of dollars. After five to 10 years, your remaining balance would be lower than it would be with standard monthly payments, even if home prices stayed the same.

When it comes time to sell, a lower loan balance means higher net proceeds. After paying off the mortgage and closing costs, you keep more of the sale price. This can be especially helpful if you plan to use the money for a down payment on your next home, pay off other debt or build savings.

Pros and cons of paying your mortgage biweekly

A significant benefit of biweekly mortgage payments is that you’ll pay much less interest over the life of the loan. You’ll also finish paying off your loan faster because you’ve made extra payments each year.

But a biweekly payment plan isn’t for everyone. Making the equivalent of one extra monthly mortgage payment annually means you'll spend more each year on housing costs. This could add further strain to a tight budget.

» MORE: Pros and cons of paying off your mortgage before retirement

How to set up biweekly mortgage payments

You can start making biweekly payments at any point during your mortgage term, but there are a few steps to follow.

1. Call your lender (or loan servicing company). Confirm if there’s a biweekly payment program you must enroll in.
2. Calculate the fees (if any). Some lenders charge fees for enrolling in biweekly payment programs. If so, calculate if the fee is worth your overall savings in interest.
3. Confirm that the extra payment goes toward the principal. Remember, lenders make money off interest, so keep track of whom you spoke with and if they confirmed that your extra payment is automatically applied to the principal.
4. Clarify the process for the first month. Some lenders may require an additional amount upfront for the first month before you can start making biweekly mortgage payments.
5. Ask about prepayment penalties. Make sure there’s no prepayment penalty for your mortgage. You can find this information in your loan documents.

“Keep in mind: Biweekly payments need to be coordinated directly with your lender. Otherwise, you can risk having additional payments going to principal buydowns instead of toward a scheduled amortized payment, leading to possible incomplete or late payment fees,” Williams warned.

Third-party payments

There are third-party companies that tout biweekly payment services on your behalf, but these companies may charge high monthly or setup fees, and they might make it difficult to get out of a payment contract.

Even worse, your credit score will suffer if the company is careless and misses one of your monthly mortgage payments.

Other ways to pay off your mortgage sooner

If your mortgage lender doesn’t allow biweekly payments or you’re not sure it’s the right strategy for your finances, consider these alternatives for possibly paying off your mortgage early.

Make at least one additional payment every year

Your lender might allow you to make a yearly principal buydown payment in addition to your regular monthly payments. You can do this by dividing your monthly payment by 12 and setting this amount aside each month in a savings account. At the end of the year, you’ll have more than enough saved to make an extra payment toward your principal.

Alternatively, you can make an annual payment for a varying amount, such as when you get your tax refund, earn a bonus at work or enjoy an unexpected windfall.

Refinance your home loan

Another way you can pay off your mortgage sooner is by refinancing into either a lower interest rate or a shorter loan term. If you refinance your 30-year mortgage to a 15-year term, you can save thousands of dollars (though your monthly payment will increase).

Keep in mind that refinancing does carry fees, so be sure to factor those costs in when calculating how much you can save.

Get rid of PMI

Private mortgage insurance (PMI) is an extra fee the lender charges for those who don’t put down 20% on a conventional loan. You can eliminate PMI once you achieve at least 20% equity in your home, either through payments or with a new property appraisal. Once you get rid of this monthly PMI payment, you can put the cash toward the mortgage principal and accelerate your equity even more.